Closing Stock Market SummaryToday's trade had a general positive disposition thanks to a feeling that the market was due for a bounce from a short-term oversold condition. This narrative found support from cooling market rates and falling oil prices, as well as a welcome moderation in the dollar after its recent run. The S&P 500 held its ground at the psychologically important 3,900 level yesterday, which added to the positive sentiment. The Nasdaq broke its seven-session losing streak as the major indices all closed just off session highs.
The Wall Street Journal reported this morning that the Fed is likely to raise the fed funds rate by 75 basis points at its September 20-21 FOMC meeting. Buyers were not deterred by the report, and that resilience acted as another upside catalyst for the market on the basis that the rate hike had already been priced in.
There was also some hawkish comments from Fed officials for participants to digest today, which the market took in stride. Fed Vice Chair Brainard (FOMC voter) indicating that the policy rate will need to rise further while Cleveland Fed President Mester (FOMC voter) reiterated her previous view that rates will need to be taken to a restrictive level and that she does not anticipate a rate cut in 2023.
The slight moderation in the US Dollar Index, which fell 0.6% to 109.58 today, helped the buying effort. The USD/JPY, up 1.5% at its peak today, was up 0.7% to 143.83. The EUR/USD was up 1.1% to 1.0010.
Buying was broad based as advancers outpaced decliners by a 3-to-1 margin at the NYSE and a greater than 2-to-1 margin at the Nasdaq.
The broad nature was also reflected by S&P 500 sector performance. Ten of the 11 sector closed with gains that ranged from 1.6% (information technology) to 3.1% (utilities). The lone laggard in the red was energy (-1.2%) amid falling oil prices.
WTI crude oil futures fell 5.9% to $81.84/bbl. Natural gas futures fell 4.4% to $7.83/mmbtu.
Treasury yields were also down today. The 2-yr note yield fell six basis points to 3.45% while the 10-yr note yield fell eight basis points to 3.27%.
Reviewing today's economic data:
- The weekly MBA Mortgage Applications Index showed a 0.8% decline compared to last week's 3.7% decline
- The trade deficit narrowed to $70.6 billion (consensus -$70.2 billion) in July from a downwardly revised deficit of $80.9 billion (from -$79.6 billion) in June. The improvement was the result of July imports being $9.7 billion less than June imports and July exports being $0.5 billion more than June exports.
- The key takeaway from the report is that it conveyed ongoing supply chain and logistics problems, as imports from the EU and China were down $4.0 billion and $3.0 billion, respectively, from June.
Dow Jones Industrial Average: -13.1% YTD
S&P 400: -14.4% YTD
S&P 500: -16.5% YTD
Russell 2000: -18.4% YTD
Nasdaq Composite: -24.6% YTD
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