Stock Market Update

[BRIEFING.COM] The stock market has been in a steady decline for most of the session after an initial move higher. Early gains faded following the release of this morning's economic data, which stirred concerns about the Fed holding rates steady in a slowing economic environment. 

Weekly jobless claims were higher than expected, the July ISM Manufacturing Index moved further into contraction (i.e. sub-50% readings), and construction spending declined in June against expectations for a slight increase. 

Treasury yields moved lower in response, but that hasn't translated into support for equities due to the concerns about economic growth.  The 10-yr note yield is down 12 basis points to 3.99% and the 2-yr note yield is down 15 basis points to 4.19%.

The slowdown worries have also manifested in falling oil prices ($77.20/bbl, -0.71, -0.9%), which has weighed on the S&P 500 energy sector (-2.3%). The only sector showing a larger decline is info tech, trading 2.6% lower due to weakness in semiconductor shares.

The PHLX Semiconductor Index (SOX) shows a 5.9% decline. The downside action follows earnings from Arm Holdings (ARM 119.95, -24.22, -16.8%), which beat quarterly expectations, but did not increase guidance.

Meanwhile, the rate-sensitive real estate (+1.3%) and utilities (+1.2%) sectors have benefitted from price action in the Treasury market.

Reviewing today's economic data:

• Weekly Initial Claims 249K (Briefing.com consensus 233K); Prior 235K; Weekly Continuing Claims 1.877 mln; Prior was revised to 1.844 mln from 1.851 mln
  • The key takeaway from the report is the rising level of initial claims -- a leading indicator -- which connotes some softening in the labor market that is expected to curtail discretionary spending activity.
• Q2 Productivity-Prel 2.3% (Briefing.com consensus 1.6%); Prior was revised to 0.4% from 0.2%; Q2 Unit Labor Costs-Prel 0.9% (Briefing.com consensus 1.7%); Prior was revised to 3.8% from 4.0%
  • The key takeaway from the report was the moderation in unit labor costs, which the Fed is eyeing closely. Unit labor costs increased 0.5% over the last four quarters, which is the lowest rate since the third quarter of 2019.
• July S&P Global US Manufacturing PMI - Final 49.6; Prior 49.5
• June Construction Spending -0.3% (Briefing.com consensus 0.1%); Prior was revised to -0.4% from -0.1%
  • The key takeaway from the report was that construction spending was soft across both the private and public sectors, reflecting weaker demand patterns that are part of a softening economy.
• July ISM Manufacturing Index 46.8% (Briefing.com consensus 48.5%); Prior 48.5%
  • The key takeaway from the report is that it conveys clear weakness in the manufacturing sector that is a byproduct of subdued demand.