Stock Market Update

[BRIEFING.COM] Stocks started the final session of the week on an upbeat note, building on gains after Fed Chair Powell's dovish sounding comments at the Jackson Hole Economic Symposium. Mr. Powell all but confirmed that a rate cut is coming in September, acknowledging that "the time has come for policy to adjust."

The chairman also noted that "downside risks to employment have increased," but the market wasn't bothered and buying activity was robust. There was a mid-session lull that had the major indices trading at intraday lows due to lagging mega cap constituents, but the indices ultimately closed near session highs. 

The Dow Jones Industrial Average rose 1.1%, the S&P 500 logged a 1.2% gain, the Nasdaq Composite climbed 1.5%, and the Russell 2000 outperformed, jumping 3.2%.

All 11 S&P 500 sectors closed higher led by real estate (+2.0%), consumer discretionary (+1.7%), information technology (+1.7%), energy (+1.5%), and materials (+1.4%). The consumer staples sector logged the slimmest gain, up 0.2%.

The upside bias was also supported by strength in the semiconductor space and a drop in Treasury yields. The PHLX Semiconductor Index (SOX) logged a 2.8% gain. The 10-yr note yield fell six basis points to 3.81% and the 2-yr note yield, which is most sensitive to changes in the fed funds rate, declined ten basis points to 3.91%.

The price action in Treasuries was also related to a stronger than expected new home sales report for July.

• Nasdaq Composite: +19.1% YTD
• S&P 500: +18.1% YTD
• S&P Midcap 400: +11.3% YTD
• Russell 2000: +9.5% YTD
• Dow Jones Industrial Average: +9.3% YTD

Reviewing today's economic data:

• New home sales surged 10.6% month-over-month in July to a seasonally adjusted annual rate of 739,000 units (Briefing.com consensus 628,000) from an upwardly revised 668,000 (from 617,000) in June. On a year-over-year basis, new home sales were up 5.6%.
  • The key takeaway from the report is that new home sales, which are tabulated when contracts are signed, saw an encouraging jump in July that coincided with mortgage rates coming down.

Looking ahead to next week, the report on Durable Goods Orders in July will be released on Monday.