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Netflix (NFLX) is trading 2.3% lower following its earnings results and notation that its operating margin in the second half of the year will be lower than the first half of the year. Some see this as more of a sell-the-news response than anything jarring from a fundamental standpoint, but it is clear to see that the pullback in Netflix has not destabilized the market.
Currently, the S&P 500 futures are up seven points and are trading 0.2% above fair value, the Nasdaq 100 futures are up 19 points and are trading 0.1% above fair value, and the Dow Jones Industrial Average futures are up 67 points and are trading 0.2% above fair value.
Market participants are finding support elsewhere.
In particular, they are looking to Dow components 3M (MMM) and American Express (AXP), which are trading higher after their better-than-expected Q2 reports and reassuring guidance; fellow Dow component Chevron (CVX), which is up 3.8% after getting the clearance to close its Hess acquisition; Fed Governor Waller's (FOMC) continued contention that the Fed can and should cut the target range for the fed funds rate by 25 basis points at the July FOMC meeting; and China's warm take, according to Reuters, that a return to a tariff war is not necessary after successful talks with the U.S.
Really, though, participants may just be drawing support from the thinking that this stock market just doesn't seem to want to go lower for any reason at all. Accordingly, they will take for granted that the trend is their friend... until it isn't.
That resolute thinking is grounded in the sturdiness of the mega-cap stocks, well-behaved Treasury yields, and a compendium of hard economic data that isn't corroborating the market's worst fears about all the tariff actions.
Granted, the data aren't suggesting unequivocally that the economy is firing on all cylinders, only that it is still running on a positive growth trajectory, supported by a relatively solid labor market that has fostered continued growth in consumer spending activity.
The retail sales and weekly initial jobless claims reports yesterday were both on point with that understanding. The June Housing Starts and Building Permits report this morning, however, was the kind of report that indicates the economy isn't firing on all cylinders.
Total housing starts increased 4.6% month-over-month in June to a seasonally adjusted annual rate of 1.321 million units (Briefing.com consensus: 1.300 million). That is the good news. The bad news is that single-unit starts declined 4.6% month-over-month. Total building permits increased 0.2% month-over-month to a seasonally adjusted annual rate of 1.397 million units (Briefing.com consensus: 1.383 million). That is the good news. The bad news is that single-unit permits declined 3.7% month-over-month.
The key takeaway from the report is that there wasn't any strength in single-unit starts and permits, which is where the strength needs to be to help curtail the affordability constraints in an existing home market that is still relatively light on available inventory for sale.
The stock market's response to the report, which will be followed by the closely watched preliminary University of Michigan Consumer Sentiment Report for July at 10:00 a.m. ET, was fairly muted.
Separately, the Treasury market has keyed in on Mr. Waller's comments and the recognition that the starts and permits data were not as uplifting as the headline numbers might suggest. The 2-yr note yield is down six basis points to 3.86%, and the 10-yr note yield is down five basis points to 4.42%.
