Stock Market Update

[BRIEFING.COM] The announcement of a 35% tariff on Canadian imports, the indication that EU will be getting a tariff letter, and the president’s acclamation that most trading partners will face a 15% to 20% tariff rate triggered the market’s worst open this week. The initial selling, however, did not persist. The mega-cap stocks led a rebound from the opening lows and helped the indices settle into a sideways drift below their unchanged lines for the majority of the session.

The market has been generally unphased by tariff headlines over the past week; sure, there were days with some early session profit taking, but these were often on the heels of strong closings.

The setback to begin today’s trading reflected the understanding that Canada and the EU are more economically consequential trading partners than many of the countries that have received tariff letters over the past two weeks. That point notwithstanding, the market retained a generally resilient posture, much like it did throughout the week.

The recovery from the opening lows was largely attributed to some mega-caps shaking off a slow start, including a 1.3% intraday climb by NVIDIA (NVDA 164.88, +0.78, +0.5%).

Additionally, mega-cap support from Amazon (AMZN 225.02, +2.76, +1.2%) and Tesla (TSLA 313.51, +3.64, +1.2%) helped the consumer discretionary sector (+0.3%) finish as one of just two sectors that ended the day in positive territory. That's not to say that mega-caps outperformed ubiquitously, as the Vanguard Mega Cap Growth ETF (-0.2) barely outpaced the S&P 500 (-0.3%).

Declines today were spread across stocks of all sizes and nearly all sectors, with the energy sector (+0.4%) being the only sector with a vast majority of its components capturing gains.

The tariff headlines ultimately prompted some broad-based profit taking in front of a week of market-moving information next week that will include the June CPI, PPI, and Retail Sales reports, and earnings results from many of the largest banks.

U.S. Treasuries were under pressure throughout today's trade, as tariff concerns had the market on its heels, beginning in the overnight trade. Today saw the more inflation-sensitive back end of the curve underperform, rounding out a week of curve-steepening action. The front end was undercut by some ruminations that all the announcements of higher tariff rates starting August 1 could leave the Fed in a sticky wait-and-see mode.

Reviewing today's data:

• The Treasury Budget for June showed a surprising surplus of $27.0 billion (Briefing.com consensus: -$257.5B) compared to a deficit of $71.0 billion in the same period a year ago. The June surplus resulted from receipts ($526 billion) exceeding outlays ($499 billion). The Treasury Budget data are not seasonally adjusted, so the June surplus cannot be compared to the May deficit of $315.7 billion.
  • The key takeaway from the report is that it showed an actual surplus, with receipts exceeding outlays. The good news is that the deficit over the last 12 months shrunk from $1.994 trillion in May to $1.896 trillion in June. The bad news is that the deficit over the last 12 months is still $1.896 trillion