Stock Market Update

[BRIEFING.COM] Stocks staged a recovery after yesterday's sharp declines. The major indices turned slightly lower ahead of the close, but still logged gains ranging from 0.8% to 1.2%. These gains are relatively muted compared to the declines registered yesterday. 

The Dow Jones Industrial Average slumped more than 1,000 points yesterday and won back nearly 300 points today. The S&P 500 settled today's session nearly 100 points lower than Friday's close.

Yesterday's retreat in equities was partially due to the yen's rapid strengthening against the dollar, which precipitated the plunge in Japan's Nikkei. The yen weakened slightly against the dollar today, acting as support for US equities and helping drive a 10% move higher in the Nikkei. The USD/JPY pair trade is +0.3% to 144.72.

Also, the CBOE Volatility Index, which spiked above 65.00 yesterday before returning to the 35.00 area, pulled back to 27.71 today.

Positive responses to earnings news from Uber (UBER 64.87, +6.39, +10.9%), Caterpillar (CAT 326.44, +9.64, +3.0%), and others aided the upside bias, along with the observation from San Francisco Fed President Daly (FOMC voter) that policy adjustments will be necessary in the coming quarter.

Treasuries retreated after the recent drop in market rates, which acted as additional support for equities, despite today's $58 billion 3-yr note auction meeting solid demand. The 10-yr note yield jumped ten basis points to 3.89% and the 2-yr note yield settled ten basis points higher at 3.98%.

With today's action, the 10-yr yield is 25 basis points lower than last Tuesday's settlement. The 2-yr yield is 38 basis points lower than its level one week ago.

• S&P 500: +9.9% YTD
• Nasdaq Composite:+9.0% YTD
• S&P Midcap 400: +4.2% YTD
• Dow Jones Industrial Average: +3.5% YTD
• Russell 2000: +1.8% YTD

Reviewing today's economic data:

• June Trade Balance -$73.1 bln (Briefing.com consensus -$72.8 bln); Prior was revised to -$75.0 bln from -$75.1 bln
  • The key takeaway from the report, though, is that both exports and imports increased in June, which is a constructive trade dynamic for the global economy.

Market participants receive the following economic data on Wednesday: 

• 7:00 ET: Weekly MBA Mortgage Index (prior -3.9%)
• 10:30 ET: Weekly crude oil inventories (prior -3.44 mln)
• 15:00 ET: June Consumer Credit (Briefing.com consensus $10.0 bln; prior $11.3 bln)