Stock Market Update

[BRIEFING.COM] The stock market encountered some selling pressure to begin the new month. Downside moves, though, were relatively modest. Selling interest was fueled by rising market rates and the feeling that the market is due for some consolidation. With today's losses, the S&P 500 is still up 19.2% for the year.

The Dow Jones Industrial Average outperformed (+0.2%), closing with a slim gain thanks to a big move higher in Caterpillar (CAT 288.65, +23.48, +8.9%), which reported pleasing quarterly results.

Some other notable companies that reported earnings endured sizable losses today. Norwegian Cruise Line Holdings (NCLH 19.41, -2.66, -12.1%), ZoomInfo Technologies (ZI 18.67, -6.90, -27.0%), and Uber (UBER 46.65, -2.81, -5.7%) were among the standouts in that respect after reporting less than perfect results and/or guidance. The aforementioned stocks experienced some consolidation after seeing big gains in the months leading up to their reports.

The action in the Treasury market created a headwind for equities today. The 10-yr note yield settled back above 4.00%, up nine basis points to 4.05%. The 2-yr note yield rose five basis points 4.91%. That move higher in yield stirred some valuation angst in the stock market that created a rationale to take some money off the table.

Only two of the S&P 500 sectors closed with gains, information technology (+0.3%) and industrials (+0.1%), while the utilities sector (-1.3%) saw the largest decline.

• Nasdaq Composite: +36.5% YTD
• S&P 500: +19.2% YTD
• Russell 2000: +13.2% YTD
• S&P Midcap 400: +12.0% YTD
• Dow Jones Industrial Average: +7.5% YTD

Reviewing today's economic data:

• The S&P Global US Manufacturing PMI rose to 49.0 in the final July reading from 46.3 in the prior reading.
• The July ISM Manufacturing Index rose to 46.4% in July (Briefing.com consensus 46.8%) from 46.0% in June The dividing line between expansion and contraction is 50.0%, so the sub-50.0% reading for July reflects a general contraction in manufacturing activity for the ninth straight month, albeit at a slower rate than the pace of contraction in June.
  • The key takeaway from the report, other than the manufacturing sector continuing to operate in a state of contraction, is that there are more signs of employment reductions in the near term to better match production. Those reductions are in-line with the Fed's thinking that its rate hikes will lead to some softening in the labor market.
• Total construction spending increased 0.5% month-over-month in June (Briefing.com consensus 0.6%) after increasing an upwardly revised 1.0% (from 0.9%) in May. Total private construction was up 0.5% month-over month while total public construction rose 0.3% month-over-month. On a year-over-year basis, total construction spending was up 3.5%.
  • The key takeaway from the report is that residential spending continues to be powered by new single family construction to meet demand that cannot be satisfied through the existing home market.
• JOLTS job openings totaled 9.582 million in June following a revised total of 9.616 million in May (from 9.824 million)

The economic calendar tomorrow includes:

• 7:00 a.m. ET: Weekly MBA Mortgage Applications Index (prior -1.8%)
• 8:15 a.m. ET: July ADP Employment Change (Briefing.com consensus 185,000; prior 497,000)
• 10:30 a.m. ET: Weekly EIA Crude Oil Inventories (prior -0.600M)