Closing Stock Market SummaryThe S&P 500 (+0.7%) and Nasdaq Composite (+0.7%) both advanced 0.7% on Tuesday and extended their winning streaks to five sessions. Risk sentiment was supported by better-than-expected earnings reports from a diversified group of companies while the market continued to weather supply chain challenges.
The Dow Jones Industrial Average increased 0.6%, and the Russell 2000 increased 0.4%.
The earnings lineup included EPS beats from Johnson & Johnson (JNJ 163.87, +3.75, +2.3%), Procter & Gamble (PG 140.66, -1.68, -1.2%), Travelers (TRV 155.39, +2.51, +1.6%), Dover (DOV 167.91, +1.12, +0.7%), and Steel Dynamics (STLD 63.50, +1.08, +1.7%). P&G, however, warned about higher commodity and freight costs this fiscal year.
P&G's warning pressured shares of the company and fed into the inflation concerns that have been driving oil prices ($83.01/bbl, +0.57, +0.7%) and long-term interest rates higher. The 10-yr yield rose five basis points to 1.64%, while the 2-yr yield fell three basis points to 0.39%.
Buyers in the stock market, however, looked past inflation/supply chain headwinds and took the earnings news at face value. Ten of the 11 S&P 500 sectors closed higher, led by utilities (+1.3%), health care (+1.3%), and energy (+1.2%) with gains over 1.0%.
The consumer discretionary sector (-0.3%) was the lone holdout amid weakness in the retail stocks, including Ulta Beauty (ULTA 363.35, -43.00, -10.6%), which provided disappointing long-term financial targets.
Aside from JNJ, other heavyweights like Apple (AAPL 148.76, +2.21, +1.5%), Facebook (FB 339.99, +4.64, +1.4%), and Walmart (WMT 144.69, +3.01, +2.1%) also provided key leadership. Walmart was added the Conviction Buy List at Goldman Sachs.
Separately, the market overlooked a disappointing housing starts and building permits report September. The report featured a 7.7% m/m decline in building permits to a seasonally adjusted annual rate of 1.555 million units (consensus 1.620 million).
As highlighted earlier, the Treasury yield curve steepened amid selling interest in longer-dated maturities. Bank stocks, though, underperformed on relative basis despite the potential benefit for net interest margins. The SPDR S&P Bank ETF (KBE 55.60, +0.14, +0.3%) increased just 0.3%. The U.S. Dollar Index fell 0.2% to 93.77.
Reviewing Tuesday's economic data:
- Housing starts declined 1.6% month-over-month in September to a seasonally adjusted annual rate of 1.555 million units ( consensus 1.620 million), but were up 7.4% year-over-year. Building permits were down 7.7% month-over-month to a seasonally adjusted annual rate of 1.589 million (consensus 1.670 million) and were flat year-over-year.
- The key takeaway from the report is that it reflects a slowdown in the pace of new construction, which is a byproduct of supply shortages, labor constraints, and high prices.
Looking ahead, investors will receive the Fed's Beige Book for October and the weekly MBA Mortgage Applications Index on Wednesday.
- S&P 500 +20.3% YTD
- Nasdaq Composite +17.4% YTD
- Dow Jones Industrial Average +15.9% YTD
- Russell 2000 +15.2% YTD;"-%