Stock Market Update

[BRIEFING.COM] The stock market got off to a strong start following several key earnings reports before the open, but broad-based selling pressure confined the major averages to a tight range that ultimately saw them close little changed from their opening levels.

Futures were only slightly higher following a fresh wave of generally positive earnings reports but ticked higher after the 8:30 ET release of the June Housing Starts and Building Permits Report, which showed better-than-expected headline numbers for starts (1.321 mln, Briefing.com consensus 1.300 mln) and permits (1.397 mln, Briefing.com consensus 1.383 mln).

The details of the report, however, showed weakness in single-unit starts and permits, which stalled the initial momentum and did little to deter the market from the selling trend that ensued shortly after the S&P 500 (unch) and Nasdaq Composite (+0.1%) touched new all-time highs.

The selling activity was broad-based but modest in today's trade and reflected a proclivity towards "selling the news" of companies that beat earnings expectations. Netflix (NFLX 1209.24, -64.93, -5.1%), American Express (AXP 307.95, -7.40, -2.4%), and 3M (MMM 153.23, -5.81, -3.7%) were among the names that faced pressure despite generally positive earnings and guidance.

There were a few winners in the wake of earnings reports. Charles Schwab (SCHW 95.78, +2.68, +2.9%), for instance, reached a new 52-week high, and Comerica (CMA 65.32, +2.90, +4.7%) and Regions Fincl (RF 26.01, +1.50, +6.1%) also fared well.

Five sectors finished in positive territory, though only the consumer discretionary (+1.0%) and lightly weighted utilities (+1.7%) advanced by more than half a percent. The energy (-1.0%) and health care (-0.6%) sectors were the only sectors that declined by more than half a percent.

Today's lack of buying conviction permeated through stocks of all sizes. The market-weighted S&P 500, the equal-weighted S&P 500, and the Vanguard Mega Cap Growth ETF all finished flat for the day.

The S&P MidCap 400 (-0.1%) slightly lagged, and while the Russell 2000 (-0.6%) underperformed, it still managed a 3.0% gain for the week.

U.S. Treasuries finished the week on a higher note with relative strength in shorter tenors driving yields on 5s and 2s to their lowest levels in a week while the long bond continued this week's underperformance.

Fed Governor Waller repeated Thursday evening that a rate cut should be made at the July FOMC meeting, but the fed funds futures market remains highly skeptical of that move, with the CME FedWatch tool showing just a 4.7% implied likelihood of a rate cut on July 30.

The 2-yr note yield settled the session down four basis points at 3.88%, and the 10-yr note yield dropped three basis points to 4.43%.

• Nasdaq Composite: +8.2% YTD
• S&P 500: +7.1% YTD
• DJIA: +4.2% YTD
• S&P 400: +1.6% YTD
• Russell 2000: +0.4% YTD

Reviewing today's data:

• Total housing starts increased 4.6% month-over-month in June to a seasonally adjusted annual rate of 1.321 million units (Briefing.com consensus: 1.300 million). That is the good news. The bad news is that single-unit starts declined 4.6% month-over-month. Total building permits increased 0.2% month-over-month to a seasonally adjusted annual rate of 1.397 million units (Briefing.com consensus: 1.383 million). That is the good news. The bad news is that single-unit permits declined 3.7% month-over-month.
  • The key takeaway from the report is that there wasn't any strength in single-unit starts and permits, which is where the strength needs to be to help curtail the affordability constraints in an existing home market that is still relatively light on available inventory for sale.
• The preliminary University of Michigan Consumer Sentiment Index for July edged higher to 61.8 (Briefing.com consensus: 61.5) from the final reading of 60.7 for June, hitting its highest level in five months. In the same period a year ago, the index stood at 66.4.
  • The key takeaway from the report is that consumer sentiment, while not strong, has improved in recent months along with inflation expectations.