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End of Day Brief - Thursday July 22 - Big caps keep stocks higher

Dow34823.35+25.35(0.07%)
Nasdaq14684.59+52.64(0.36%)
SP 5004367.48+8.79(0.20%)
10-yr Note +3/321.265
NYSEAdv 1006 Dec 2209 Vol 742.3 mln
NasdaqAdv 1533 Dec 2825 Vol 3.5 bln


Industry Watch

Strong: Information Technology, Health Care, Consumer Discretionary
Weak: Energy, Financials, Real Estate, Industrials, Consumer Staples


Moving the Market

-- Market consolidates rebound rally as signs of peak growth linger

-- Mega-caps and health care stocks helped large-cap indices close slightly higher

-- Weekly initial claims (419,000) reached highest level since mid-May

-- Earnings reports remained mostly better than expected


Large caps keep the market moving higher

Dow +25.35 at 34823.35, Nasdaq +52.64 at 14684.59, S&P +8.79 at 4367.48

[BRIEFING.COM] The large-cap indices closed slightly higher on Thursday, holding onto their recent rebound gains largely due to strength in the mega-cap stocks. The S&P 500 (+0.2%), Nasdaq Composite (+0.4%), and Dow Jones Industrial Average (+0.1%) increased between 0.1-0.4% while the Russell 2000 pulled back 1.6%.

Overall price action was a bit sluggish, at least compared to the prior two days, as the market appeared to be consolidating its rebound rally while signs of peak growth lingered. Weekly initial claims reached their highest level since mid-May at 419,000 (Briefing.com consensus 360,000), and the Conference Board's Leading Economic Index increased at its slowest pace since February at 0.7% (Briefing.com consensus 0.9%).

Declining issues outpaced advancing issues by a 2:1 margin at the NYSE and Nasdaq, with energy and financial stocks being among the biggest losers after being the biggest winners yesterday. The S&P 500 financials (-1.0%) and energy (-1.1%) sectors each declined about 1%. Energy stocks struggled despite higher oil prices ($71.92/BBL, +1.64, +2.3%).

The mega-caps, however, kept the market in there -- potentially as a byproduct of the peak growth narrative. Microsoft ($MSFT 286.14, +4.74, +1.7%) drew additional support from Citigroup after the firm raised its MSFT price target to a Street-high $378 from $310. The Vanguard Mega Cap Growth ETF ($MGK 239.25, +1.96, +0.8%) rose 0.8%.

The health care sector (+0.7%) was another difference marker, joining the information technology sector (+0.7%) atop the leaderboard with a 0.7% gain.

Texas Instruments ($TXN 183.91, -10.33, -5.3%), meanwhile, kept on a lid on many of the semiconductor stocks after providing conservative guidance for Q3, feeding into the narrative that corporate earnings are also subject to the slower growth narrative. TXN shares fell 5%, and the Philadelphia Semiconductor Index declined 0.9%.

To be fair, some companies like AT&T ($T 28.01, +0.11, +0.4%) did provide upbeat guidance. Union Pacific ($UNP 219.54, +2.35, +1.1%), CSX ($CSX 32.67, +1.10, +3.5%), Blackstone ($BX 110.13, +4.34, +4.1%), and Dow Inc. ($DOW 60.48, +0.75, +1.3%) closed higher following their earnings reports.

In the Treasury market, the 10-yr yield flirted with 1.32%, then slipped to 1.23% in the hours following the weekly initial claims report, and finally settled two basis points below yesterday's settlement at 1.27%. The 2-yr yield was unchanged at 0.21%. The U.S. Dollar Index increased 0.1% to 92.85.

Reviewing Thursday's economic data:

  • Initial claims for the week ending July 17 increased by 51,000 to 419,000 (Briefing.com consensus 360,000). Continuing claims for the week ending July 10 decreased by 29,000 to 3.236 million, which is the lowest level since March 21, 2020.
    • The key takeaway from the report is the disappointment of the initial claims number, which was the highest it has been since mid-May and clearly misaligned with an improving economy; accordingly, it is likely to pour a little fuel on the peak growth narrative fire.
  • Existing home sales increased 1.4% m/m in June to a seasonally adjusted annual rate of 5.86 million (Briefing.com consensus 5.90 million) from a downwardly revised 5.78 million (from 5.80 million) in May. Total sales in June were up 22.9% from a year ago.
    • The key takeaway from the report is that the supply of existing homes for sale remains extremely limited. That is driving up the pace of price increases well beyond the pace of income growth, which is creating affordability pressures for prospective buyers, particularly first-time buyers.
  • The Conference Board's Leading Economic Index (LEI) increased 0.7% in June (Briefing.com consensus 0.9%) after increasing a downwardly revised 1.2% (from 1.3%) in May.
    • The key takeaway from the report is that overall growth remained widespread; however, the pace of growth in the leading indicators is slowing, having gone from 1.4% in March to 0.7% in June. The latter is the slowest pace since February.

Looking ahead, investors will receive the preliminary IHS Markit Manufacturing and Services PMis for July on Friday.

  • S&P 500 +16.3% YTD
  • Nasdaq Composite +13.9% YTD
  • Dow Jones Industrial Average +13.8% YTD
  • Russell 2000 +11.4% YTD

Source: (Briefing.com)

Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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