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End of Day Brief - Tuesday July 20 - Stocks bounce back

Dow34511.99+549.95(1.62%)
Nasdaq14498.87+223.89(1.57%)
SP 5004323.06+64.57(1.52%)
10-yr Note -1/321.200
NYSEAdv 2652 Dec 547 Vol 1.1 bln
NasdaqAdv 2396 Dec 940 Vol 4.5 bln


Industry Watch

Strong: Financials, Industrials, Real Estate
Weak: Consumer Staples


Moving the Market

-- Investors bought the dip, boosting major indices to gains of at least 1.5%

-- IBM (IBM) reported positive earnings results

-- 10-yr yield settled at 1.21% after dipping below 1.14% followed mixed housing starts and building permits data for June

-- Technical factors and a fear of missing out on a sustained rebound rally


Stocks make a big rebound rally

Dow +549.95 at 34511.99, Nasdaq +223.89 at 14498.87, S&P +64.57 at 4323.06

[BRIEFING.COM] The major indices rallied by at least 1.5% on this "turnaround Tuesday," as investors bought Monday's dip and sold longer-dated Treasuries. The Russell 2000 was the outright winner with a 3.0% gain, followed by the Dow Jones Industrial Average (+1.6%), Nasdaq Composite (+1.6%), and S&P 500 (+1.5%).

The market seemed to be operating on the assumption that conditions were favorable for bounce, especially after the S&P 500 successfully retested its 50-day moving average (4242) yesterday. Others believed the Russell 2000 had entered correction territory too quickly and that value/cyclical stocks had gotten oversold on a short-term basis.

The rebound gains were distributed across ten of the 11 S&P 500 sectors, including industrials (+2.7%) and financials (+2.4%) with gains over 2.0%. Advancing issues outpaced declining issues by a 5:1 margin at the NYSE. The consumer staples sector (-0.1%) bucked the positive trend.

IBM ($IBM 139.97, +2.05, +1.5%) reported better-than-expected earnings results, which may have instilled hope that other technology companies will follow in IBM's footsteps throughout the rest of the earnings season. Apple ($AAPL 146.16, +3.70, +2.6%) drew additional support from a price-target increase to $166 from $155 at UBS.

Some companies like HCA Healthcare ($HCA 248.90, +31.27, +14.4%) and Dover ($DOV 162.14, +10.17, +6.7%) also felt confident enough to issue upbeat guidance, although it's worth mentioning that PPG Industries ($PPG 158.49, -7.26, -4.4%) warned it will likely continue to see supply disruptions in Q3. Travelers ($TRV 151.09, -0.17, -0.1%) closed lower despite beating EPS estimates.

The warning from PPG was presumably because of the coronavirus, but the extent of today's gains and some curve-steepening activity in the Treasury market seemed to suggest that some of the growth/coronavirus concerns have been overstated.

The 10-yr yield increased three basis points to 1.21% after dipping below 1.14% immediately following mixed housing starts and building permits data for June. Housing starts were better than expected while permits, which are a leading indicator, declined 5.1% m/m to a seasonally adjusted annual rate of 1.598 million (Briefing.com consensus 1.700 million).

The 2-yr yield decreased two basis points to 0.19% while the 30-yr yield rose five basis points to 1.87%. The U.S. Dollar Index increased 0.1% to 92.95. WTI crude futures rose 1.4%, or $0.90, to $67.32/BBL. The CBOE Volatility Index (19.73, -2.77, -12.3%) slipped below 20.00.


Reviewing Tuesday's economic data:

  • Total housing starts rose 6.3% month-over-month to a seasonally adjusted annual rate of 1.643 million (Briefing.com consensus 1.600 million). Building permits declined 5.1% month-over-month to a seasonally adjusted annual rate of 1.598 million (Briefing.com consensus 1.700 million).
    • The key takeaway from the report is that permits -- a leading indicator -- declined across all regions for single-family units, suggesting there will be a slowdown in building activity that could be related to a variety of factors, including higher costs, a lack of available labor, and/or high selling prices curtailing buyer demand.

Looking ahead, investors will receive the weekly MBA Mortgage Applications Index on Wednesday.

  • S&P 500 +15.1% YTD
  • Dow Jones Industrial Average +12.8% YTD
  • Nasdaq Composite +12.5% YTD
  • Russell 2000 +11.1% 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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