Closing Stock Market SummaryThe S&P 500 increased 0.1% on Wednesday in a defensive session led by Apple (AAPL 149.15, +3.51, +2.4%) and the counter-cyclical stocks. The Dow Jones Industrial Average (+0.1%) also eked out a positive finish, while the Nasdaq Composite (-0.2%) closed slightly lower. The Russell 2000 dropped 1.6%.
The best levels of the day were right after the open when the S&P 500 hit a record high, as the market absorbed several market-friendly developments, including an observation from Fed Chair Powell. In his prepared remarks to Congress for his semiannual testimony on monetary policy, Mr. Powell remarked that "reaching the standard of 'substantial further progress' is still a ways off."
That suggested the Fed still isn't ready to tone down its extraordinarily accommodative policy, even with the high rates of inflation that the Fed Chair acknowledged. The Treasury market, meanwhile, continued to behave as if inflation rates are peaking since long-term interest rates backed down following a hot Producer Price Index (PPI) report for June.
Specifically, producer prices for final demand rose 1.0% m/m (Briefing.com consensus +0.6%) while producer prices, excluding food and energy, also rose 1.0% m/m (Briefing.com consensus +0.5%). Year-over-year, they were running noticeably hot at 7.3% and 5.6%, respectively.
The 10-yr yield fell six basis points to 1.36%, which was cited by some as a supportive factor for the S&P 500 information technology sector (+0.7%). That sector, and the major indices, really looked to Apple for support, though, after Bloomberg reported the company asked suppliers to increase production for its next-gen iPhone by 20% this year.
The defensive tone was further corroborated by the positive performances of the real estate (+0.9%), consumer staples (+0.9%), and utilities (+0.8%) sectors. Conversely, the energy (-2.9%) and financials (-0.5%) sectors were pockets of weakness amid the lower interest rates and weaker oil prices ($73.07, -2.17, -2.9%).
What's more, the financials sector had to contend with negative reactions to EPS beats from Bank of America (BAC 38.86, -1.00, -2.5%), BlackRock (BLK 880.32, -27.75, -3.1%), and Citigroup (C 68.20, -0.17, -0.3%). Wells Fargo (WFC 44.98, +1.75, +4.1%), however, rose 4% following its report.
Oil prices struggled after OPEC+ reportedly reached an agreement to increase production after failing to do so earlier this month. The news overshadowed the eighth-straight weekly inventory draw out of the EIA.
The 2-yr yield decreased three basis points to 0.22%. The U.S. Dollar Index fell 0.4% to 92.37.
Reviewing Wednesday's economic data:
- The Producer Price Index for final demand increased 1.0% month-over-month (consensus +0.6%), as did the Producer Price Index for final demand, less food and energy (consensus +0.5%). That left the year-over-year growth rate at 7.3% for total PPI -- the largest since November 2010 -- versus 6.6% in May. The year-over-year growth rate for core PPI was 5.6%, up from 5.3% in May.
- The key takeaway from the report is that producers are encountering higher prices that will create profit margin pressures if they are not offset with pricing actions.
- The Federal Reserve's Beige Book for July described overall economic growth as "moderate to robust."
- The weekly MBA Mortgage Applications Index jumped 16.0% following a 1.8% decline in the prior week.
Looking ahead to Thursday, investors will receive the weekly Initial and Continuing Claims report, Industrial Production and Capacity Utilization for June, the Empire State Manufacturing Survey for July, the Philadelphia Fed Index for July, and Import and Export Prices for June.
- S&P 500 +16.5% YTD
- Dow Jones Industrial Average +14.1% YTD
- Nasdaq Composite +13.6% YTD
- Russell 2000 +11.5% YTD
