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End of Day Brief - Thursday July 8 - Markets pullback/profit taking

SP 5004320.82-37.31(-0.86%)
10-yr Note +24/321.297
NYSEAdv 778 Dec 2432 Vol 972.1 mln
NasdaqAdv 1430 Dec 2571 Vol 4.5 bln

Industry Watch

Strong: Consumer Discretionary, Real Estate
Weak: Financials, Materials, Industrials

Moving the Market

-- General de-risking and profit-taking efforts

-- Peak growth concerns fueled in part after Japan extended state of emergency through the Olympics

-- 10-yr yield touched 1.25% early in the morning before recovering a bit during the day

-- Most stocks closed off session lows

Investors take profits as news fuels a peak growth narrative

Dow -259.86 at 34421.93, Nasdaq -105.28 at 14559.79, S&P -37.31 at 4320.82

[BRIEFING.COM] The S&P 500 (-0.9%) and Nasdaq Composite (-0.7%) pulled back from record territory on Thursday, as investors mainly took profits amid pestering peak growth concerns. The Dow Jones Industrial Average declined 0.8% while the Russell 2000 declined 0.9% after it led the major indices lower with a 2.7% intraday decline.

The negative bias was formed overnight, reportedly because Japan extended its coronavirus state of emergency through Aug. 22 (it later confirmed that spectators will be banned at the Olympics), the People's Bank of China could soon cut the required reserve ratio for banks, and the 10-yr yield traded as low as 1.25%.

These developments harped on the oft-repeated narrative that growth rates are apt to slow down, partially because the Delta variant is hurting foreign economies and could further strain parts of the labor market. On a related note, weekly initial claims were higher than expected at 373,000 ( consensus 350,000).

By midday, though, the Russell 2000 had returned to its flat line, the large-cap indices had recouped more than half of their losses, and the 10-yr yield nearly returned to its unchanged mark. This comeback effort unfortunately fell short, feeding into the narrative that the market was running on tired legs and due for a pullback.

All 11 S&P 500 sectors closed lower, led by the cyclical financials (-2.0%), industrials (-1.4%), and materials (-1.4%) sectors. The consumer discretionary sector (-0.1%) declined just 0.1% due to strength in ($AMZN 3731.41, +34.83, +0.9%) and Tesla ($TSLA 652.81, +8.16, +1.3%). Growth stocks in general were weak, though.

Interestingly, oil prices ($72.98/BBL, +0.80, +1.1%) did stage a successful comeback, rising 1% after being down 1.9% intraday. The turnaround was aided by data showing the seventh-straight weekly inventory draw out of the EIA.

The 10-yr yield and 2-yr yield both settled lower by three basis points to 1.29% and 0.19%, respectively. The U.S. Dollar Index decreased 0.3% to 92.37.

All in all, the growth-oriented headlines and the unnerving decline in the 10-yr yield presumably made it hard to justify another positive day. With growth/inflation rates in mind, the market will surely be paying attention to the China CPI and PPI data for June and the industrial production reports for the UK, Italy, and France tomorrow.

Reviewing Thursday's economic data:

  • For the week ending July 3, initial claims increased 2,000 to 373,000 ( consensus 350,000). Continuing claims for the week ending June 26 decreased by 145,000 to 3.339 million -- the lowest since March 21, 2020.
    • The key takeaway from the report is in the recognition that the four-week moving average for initial claims (394,500) is at its lowest level since March 14, 2020. That's still too high, yet the trend remains encouraging.
  • Consumer credit increased by $35.3 bln in May ( consensus $19.0B) after increasing an upwardly revised $20.0 bln (from $18.6 bln) in April. The key takeaway from the report is that the expansion in consumer credit in May was the largest since December 2010.

Looking ahead, investors will receive Wholesale Inventories for May on Friday.

  • S&P 500 +15.0% YTD
  • Russell 2000 +13.0% YTD
  • Nasdaq Composite +13.0% YTD
  • Dow Jones Industrial Average +12.5% YTD

Source: (

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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