Stock Market Update

[BRIEFING.COM] The stock market logged solid declines on the final session of the week. Like yesterday, growth concerns were driving factor of today's price action. The market received more disappointing economic data this morning, adding to the feeling that the economy is headed for a deeper slowdown while the Fed remains on pause.

Nonfarm payrolls increased by just 114,000 (Briefing.com consensus 170,000), the unemployment rate jumped to 4.3% from 4.1%, and average hourly earnings decelerated on a year-over-year basis to 3.6% from 3.8%. A labor market that softens more than anticipated could translate into lower spending, which would impact earnings growth. 

Growth concerns also sent Treasury yields sharply lower and increased rate cut expectations. The 10-yr note yield settled 18 basis points lower at 3.79% and the 2-yr note yield settled 29 basis points lower at 3.87%. The CME Fed Watch Tool now shows a 71.5% probability of a 50-basis points rate cut at the September FOMC meeting versus 22.0% a day ago.

Negative responses to some earnings news also contributed to the downside bias in the stock market.

Dow components Amazon.com (AMZN 167.90, -16.17, -8.8%) and Intel (INTC 21.48, -7.57, -26.1%) were standouts in that respect. AMZN shares were reacting to weaker-than-expected Q3 revenue guidance while INTC shares plunged after it disappointed with Q2 earnings, Q3 guidance, and news that it will be suspending its dividend and cutting more than 15% of its workforce.

Fellow Dow component, and the largest stock in the S&P 500, Apple (AAPL 219.86, +1.50, +0.7%) went against the grain, trading higher after reporting quarterly results that featured better than expected earnings and revenue.

Just about everything participated in today's broad retreat. Seven S&P 500 sectors declined at least 1.9% and the A-D line favors decliners by a 3-to-1 margin at the NYSE.

• S&P 500: +12.1% YTD
• Nasdaq Composite:+11.8% YTD
• S&P Midcap 400: +6.0% YTD
• Dow Jones Industrial Average: +5.4% YTD
• Russell 2000: +4.1% YTD

Reviewing today's economic data:

• July Nonfarm Payrolls 114K (Briefing.com consensus 170K); Prior was revised to 179K from 206K, July Nonfarm Private Payrolls 97K (Briefing.com consensus 153K); Prior 136K, July Avg. Hourly Earnings 0.2% (Briefing.com consensus 0.3%); Prior 0.3%, July Unemployment Rate 4.3% (Briefing.com consensus 4.1%); Prior 4.1%, July Average Workweek 34.2 (Briefing.com consensus 34.3); Prior 34.3
  • The key takeaway from the report is that it is an economic slowdown signal. How much of a slowdown will avail itself in coming months, but in the context of a market newly worried about a hard landing and the Fed making a policy mistake by keeping rates higher for longer, this report will not assuage those concerns.
• June Factory Orders -3.3% (Briefing.com consensus 0.4%); Prior -0.5%
  • The key takeaway from the report is that the weakness in factory orders was not as pronounced as the headline suggests, as the weakness was driven by transportation equipment orders, which are notoriously volatile.

Looking ahead, Monday's economic data is limited to the final July S&P Global U.S. Services PMI (prior 56.0) at 9:45 ET, the July ISM Non-Manufacturing Index (prior 48.8%) at 10:00 ET, and the Senior Loan Officer Survey at 14:00 ET.