Stock Market Update

[BRIEFING.COM] Yesterday's upward momentum and a flurry of earnings reports quickly propelled the S&P 500 (+0.1%, intraday high of 6,381.31) and Nasdaq Composite (+0.2%, intraday high of 21,113.10) to fresh record highs, and while the majority of the session passed in an uneventful manner, the early gains were enough to see the indices capture record closing highs as well. 

Earnings were a key catalyst for the communication services sector (+0.5%), which saw continued outperformance in cellular providers after T-Mobile US (TMUS 247.50, +13.57, +5.8%) raised its guidance and delivered an impressive EPS beat. More notably, the company led the industry in key metrics, including service revenue, postpaid net additions, and postpaid phone net additions. 

The sector also benefitted from top component Alphabet (GOOG 193.28, +1.76, +0.9%) trading higher after the company beat EPS expectations by $0.13 and reassured the market about the industry's commitment to AI development by raising its capital spending guidance by $10 billion to $85 billion.

Alphabet's hefty commitment to AI, combined with headlines that President Trump signed executive orders to support the export of American AI technology and the buildout of data center infrastructure, led to the technology sector (+0.7%) finishing as one of the top performers.

Though the sector captured a similar gain yesterday, sluggishness amongst chipmakers this week persisted, with the PHLX Semiconductor Index posting a modest gain of 0.1%, which leaves it down 1.5% for the week.

The energy sector (+0.7%) rounded out the top three performers, with a vast majority of its constituents capturing modest gains amid a $0.94 increase in oil prices to $66.19 per barrel, a change of 1.4%.

The eight other sectors finished in negative territory, though the consumer discretionary (-1.2%) and materials (-0.8%) were the only sectors with losses greater than 0.5%.

The consumer discretionary sector faced pressure after Tesla (TSLA 305.30, -27.26, -8.2%) reported EPS in-line, with an 11.8% decrease in revenues year-over-year and deliveries falling 13.5% in that same time span. More importantly, CEO Elon Musk warned of "a few rough quarters" ahead, citing the expiration of federal electric vehicle tax credits as a significant headwind.

Chipotle Mexican Grill (CMG 45.76, -7.02, -13.3%) also traded lower following its earnings release, which saw the company report EPS in line, with revenues rising a slim 3.0% year-over-year, and issuing flat FY25 comparable sales guidance.

Despite the poor showing from Tesla, mega-cap stocks performed well, with the Vanguard Mega Cap Growth ETF finishing with a 0.4% gain. The outperformance in mega-cap names preserved early gains in the major averages, as eight sectors finished in negative territory and breadth figures favored decliners by a nearly 2-to-1 ratio. 

Relatively broad-based selling activity saw small-cap and mid-cap stocks give back some of their gains from earlier in the week, as the S&P Mid Cap 400 finished with a loss of 0.9%, and the Russell 2000 lost 1.3%.

Today's session reflected the idea that the market is still optimistic about the potential of AI growth, but a lack of trade developments and other headlines resulted in some profit taking in most other spaces. 

U.S. Treasuries finished Thursday with losses in most tenors, though the long end outperformed, allowing the long bond to reclaim its opening loss by the close. Longer tenors climbed off their lows after today's second batch of data showed that flash July S&P Global U.S. Manufacturing PMI (49.5; prior 52.9) returned to contraction, while activity in the services sector accelerated, with the flash July S&P Global U.S. Services PMI hitting 55.2, up from 52.9 in June.

The 10-year note yield settled up two basis points to 4.41%.

• Nasdaq Composite: +9.1% YTD
• S&P 500: +8.2% YTD
• DJIA: +5.0% YTD
• S&P 400: +2.2% YTD
• Russell 2000: +1.0% YTD

Reviewing today's data:

• New home sales increased 0.6% month-over-month in June to a seasonally adjusted annual rate of 627,000 units (Briefing.com consensus 650,000) from an unrevised 623,000 in May. This leaves the pace of sales near the lowest level of the year, comparable to what was seen in October. On a year-over-year basis, new home sales were down 6.6%.
  • The key takeaway from the report is that is that the pace of sales remained near the lowest level of the year, as sharp decreases in sales in the Northeast and the West masked gains in the Midwest and the South. There was pressure on the median selling price as homes priced between $300,000 and $399,000 accounted for 35% of all sales, up from 25% in May.
• Initial jobless claims for the week ending July 19 decreased by 4,000 to a lowly 217,000 (Briefing.com consensus: 225,000). Continuing jobless claims for the week ending July 12 increased by 4,000 to 1.955 million.
  • The key takeaway from the report is still the same. The low level of initial jobless claims connotes a relatively solid labor market; however, the elevated level of continuing jobless claims connotes some added difficulty in finding a new job in the event one gets laid off by their employer.
• The S&P Global U.S. Manufacturing PMI hit 49.5 in the preliminary reading for July, down from 52.9 in June.
• The S&P Global U.S. Services PMI hit 55.2 in the preliminary reading for July, up from 52.9 in June.
• Weekly natural gas inventories increased by 23 bcf after increasing by 46 bcf a week ago.