TheChek News Flow

Closing Stock Market Summary

The S&P 500 (+0.3%) and Nasdaq Composite (+0.1%) eked out intraday and closing record highs on Thursday, although they closed off session highs amid softness in the growth stocks. The Dow Jones Industrial Average increased 0.4% while the Russell 2000 increased 0.7%. 

Unlike yesterday, today was more of a value-oriented session amid continued improvement in the weekly initial and continuing claims report. Both readings decreased to their lowest levels since the start of the pandemic, with initial claims checking in at 340,000 (Briefing.com consensus 348,000). 

The shift into "value" was best manifested in the 0.6% gain in the Russell 1000 Value Index, which was better than the gains in the S&P 500 and Nasdaq. The S&P 500 energy (+2.5%) and industrials (+1.0%) sectors -- two cyclical groups often lumped into the value category -- were pockets of strength.

The energy sector was impressive with a 2.5% gain, largely due to the 2% gain in oil prices ($69.96/bbl, +1.41, +2.1%). WTI crude futures settled close to $70.00 per barrel. 

Conversely, the Russell 1000 Growth Index closed flat and the Vanguard Mega Cap Growth ETF (MGK 248.98, -0.32, -0.1%) decreased 0.1%. The S&P 500 information technology (-0.1%), communication services (-0.7%), and consumer discretionary (-0.1%) sectors -- which contain the mega-cap stocks -- were the only sectors that closed lower. 

The mega-caps had been hitting record highs on an almost regular basis recently, so their underperformance today likely had more to do with a breather than anything else. Low interest rates remained a supportive factor for the growth stocks. 

The Treasury market held steady ahead of the August employment report tomorrow. The 2-yr yield was unchanged at 0.21%, and the 10-yr yield decreased one basis point to 1.29%. The U.S. Dollar Index decreased 0.2% to 92.23. 

Separately, Hormel Foods (HRL 43.57, -2.10, -4.6%) was one of the biggest laggards in the S&P 500 after providing an underwhelming earnings report. HRL shares declined 4.6%. 

Reviewing Thursday's economic data:

• For the week ending August 28, initial claims decreased by 14,000 to 340,000 (consensus 348,000), which is the lowest level since March 14, 2020. Continuing claims for the week ending August 21 decreased by 160,000 to 2.748 million, which is also the lowest level since March 14, 2020.
  • The key takeaway from the report is the same as before: the trend is moving in a direction that is suggestive of an improving labor market.
• The trade deficit for July narrowed to $70.1 billion (consensus -$74.0 billion) from an upwardly revised $73.2 billion (prior -$75.7 billion) in June. The narrowing was the result of July exports being $2.8 billion more than June exports, and July imports being $0.4 billion less than June imports.
  • The key takeaway from the report is that the real trade deficit in July was slightly narrower than the average real trade deficit for Q2. That will compute as a positive input for Q3 GDP forecasts.
• Factory orders for manufactured goods increased 0.4% m/m in July, as expected, following a 1.5% increase in June. Shipments of manufactured goods were up 1.6% after increasing 1.9% in June.
  • The key takeaway from the report is that the pace of order growth for manufactured goods slowed noticeably in July, which is emblematic of headwinds created by the Delta variant and supply chain bottlenecks.
• Q2 productivity was revised down to 2.1% (consensus 2.5%) from the advance estimate of 2.3% and unit labor costs were revised up to 1.3% (consensus 0.8%) from the advance estimate of 1.0%.
  • The downward revision to productivity is a bit disappointing, but it won't resonate as a market-moving factor knowing that we are two-thirds of the way through the third quarter.

Looking ahead, investors will receive the Employment Situation Report for August, the ISM Non-Manufacturing Index for August, and the final IHS Markit Services PMI for August on Friday. 

• S&P 500 +20.8% YTD
• Nasdaq Composite +19.0% YTD
• Russell 2000 +16.7% YTD
• Dow Jones Industrial Average +15.8% YTD

After Hours Summary: MDB +12.4%, PD +11.5%, OXM +7.4%, GWRE +5.5% higher on earnings; YEXT -11.6%, HPE -1.1%, DOCU -0.7%, AVGO -0.5% lower on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: MDB +12.4%, PD +11.5%, OXM +7.4%, OOMA +6.4% (also names new CFO), GWRE +5.5%, SAIC +1.3%

Companies trading higher in after hours in reaction to news: APOP +51.5% (reports first ApoGraft transplantation in Leukemia patient in clinical trial), REAL +2.1% (provides monthly business update), MARA +0.9% (provides production and mining updates for August), CSWC +0.6% (increases dividend), LH +0.6% (raises minimum wage to $15/hr)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: YEXT -11.6%, JOAN -9.9%, LAW -6.1%, NX -3.6%, CTLP -3.3%, HPE -1.1%, DOCU -0.7%, AVGO -0.5%, COO -0.2%, MDLA -0.1% (note: co previously announced it's being acquired by Thoma Bravo)

Companies trading lower in after hours in reaction to news: FBRX -82.2% (top-line data from Phase 2 trial of FB-401 fails to meet statistical significance), SGOC -4% (stock offering), BYND -1.7% (COO steps down), IGT -1.7% (expands PlaySports platform into Wisconsin via deal with at Oneida Casino), CRBU -1.4% (announces publication of data for genome editing with chRDNA technology), LQDA -1.1% (stock offering), CI -0.7% (THC and CI sign new multi-year contract for expanded network access), NDAQ -0.4% (reports August 2021 metrics), SHLX -0.4% (provides assessment of initial impacts related to Hurricane Ida), THC -0.2% (THC and CI sign new multi-year contract for expanded network access), HNI -0.1% (to open new manufacturing plant in Mexico), NFLX -0.1% (launching new PGA Tour episodic documentary, according to GOLF.com)