Stock Market Update

[BRIEFING.COM] The stock market was encouraged by some key economic data releases and earnings reports before the open that prompted a day of broad-based gains, ultimately propelling the S&P 500 (0.5%) and Nasdaq Composite (+0.7%) to new all-time highs.

Travelers (TRV 261.81, +9.62, +3.81%), PepsiCo (PEP 145.44, +10.09, +7.5%), Citizens Financial Group (CFG 48.82, +1.85, +3.9%), Snap-On (SNA 337.80, +24.79, +7.92%), and Taiwan Semiconductor Manufacturing (TSM 245.60, +8.04, +3.38%) were among the more notable companies to report better-than-expected earnings and to trade higher after their reports.

Notably, equity futures were little changed following these encouraging earnings reports, but that changed after the 8:30 ET release of the retail sales and initial jobless claims reports triggered a positive opening that got extended over the entirety of the session.

Total retail sales rose 0.6% month-over-month in June after two consecutive months of decline, and initial jobless claims for the previous week decreased by 7,000 to 221,000.

The increase in retail sales and the surprisingly low level of layoffs conveyed an upbeat message about consumer spending and consumer spending potential that was reflected in the pro-cyclical advance by the stock market.

Broad-based buying interest saw nine sectors finish in positive territory, with sector strength and breadth figures improving throughout the session.

The information technology sector (+0.9%) was among the top performers, with chipmakers displaying strength after Taiwan Semi’s report. The PHLX Semiconductor Index finished with a gain of 0.7%. The strength in tech stocks contributed to the Nasdaq Composite (+0.7%) reaching a new all-time high of 20,911.83.

Large tech names were not the only beneficiaries of today's risk-on move, as strength was seen across stocks of all sizes.

In fact, small-cap stocks outperformed the broader market, evidenced by a 1.2% gain in the Russell 2000. Mid-caps performed similarly, with the S&P Mid Cap 400 finishing up 1.1%.

Mega-caps, for their part, did not underperform; smaller caps simply fared better today, with economic growth optimism contributing to their outperformance.

The Vanguard Mega Cap Growth ETF closed with a gain of 0.6%, a slight edge over the S&P 500 (+0.5%).

The Treasury market got stymied by the positive economic news and some remarks from New York Fed President Williams (FOMC voter) and Fed Governor Kugler (FOMC voter). Both Fed officials indicated that the current policy rate is appropriate for the conditions they see in front of them, which includes the possibility of tariff-driven inflation in coming months. Treasuries, however, suffered only modest losses, with shorter-dated securities faring worse than longer-dated securities in a curve-flattening trade.

The 2-year note yield finished up 3 basis points at 3.92%, and the 10-year note yield finished up one basis point at 4.47%. The U.S. Dollar Index increased 0.3% to 98.68.

• Nasdaq Composite +8.15% YTD
• S&P 500 +7.1% YTD
• DJIA: +4.6% YTD
• S&P 400: +1.7% YTD
• Russell 2000: +1.1% YTD

Reviewing today's data:

• Total retail sales increased 0.6% month-over-month in June (Briefing.com consensus: 0.2%) following a 0.9% decline in May. Excluding autos, retail sales rose 0.5% month-over-month (Briefing.com consensus: 0.3%) following an upwardly revised 0.2% decline (from -0.3%) in May.
  • The key takeaway from the report is that the sales pickup was fairly broad-based across retail businesses following declines in April and May. Importantly, the June report also conveyed increases in discretionary spending activity, captured in areas like autos (+1.2%), apparel (+0.9%), building materials and garden equipment supplies (+0.9%), and food services and drinking places (+0.6%).
• Initial jobless claims for the week ending July 12 decreased by 7,000 to 221,000 (Briefing.com consensus: 230,000). Continuing jobless claims for the week ending July 5 increased by 2,000 to 1.956 million.
  • The key takeaway from the report is the remarkably low level of initial jobless claims, which connotes limited layoff activity that fits hand-in-hand with good business conditions and a good outlook.
• The Philadelphia Fed Index jumped to 15.9 in July (Briefing.com consensus: -0.2) from -4.0 in June, led by increases in the indexes for new orders, shipments, and the number of employees. However, there were also increases registered in the indexes for prices paid and prices received. The dividing line between expansion and contraction is 0.0.
• Import prices in June were up 0.1%, as were nonfuel import prices. Export prices, meanwhile, jumped 0.5% month-over-month, as did non-agricultural export prices. On a year-over-year basis, import prices were down 0.2%, nonfuel import prices were up 1.2%, export prices increased 2.8%, and nonagricultural export prices jumped 2.9%.
• July NAHB Housing Market Index (Actual 33; Briefing.com consensus: 32; prior 32)
• May Business Inventories (Actual 0.0%; Briefing.com consensus -0.1%; prior 0.0%)