Stock Market Update

[BRIEFING.COM] The DJIA (+0.3%) and S&P 500 (-0.2%) reached new record highs this morning, but a swath of economic data and declining interest rate cut expectations have kept stocks largely retreating throughout the session.

The DJIA's advance is underpinned by a substantial gain in UnitedHealth (UNH 309.76, +38.27, +14.10%), with shares trading sharply higher after it was reported that Berkshire Hathaway (BRK.B 481.36, +2.30, +0.5%) purchased over 5 million shares in UNH last quarter, worth around $1.6 billion.

The July retail sales report increased 0.5% (Briefing.com consensus 0.5%), in line with expectations, but showed some key pockets of weakness. Meanwhile, the preliminary August reading of the University of Michigan Consumer Sentiment Index (58.6; Briefing.com consensus 61.3) marked the first downturn in consumer sentiment in four months, driven by rising worries about inflation.

Inflation concerns have continued to chip away at the probability of a 25 basis point rate cut at the September FOMC meeting, with the CME FedWatch tool showing an 86.6% probability, down from 92.1% yesterday. The decrease is modest but hampers the probability of further rate cuts later in the year.

Chicago Fed President Austan Goolsbee (voting FOMC member) said in a CNBC interview that inflation data has been mixed, but the Fed should not overreact to one month of data, citing a need to figure out which price increases to ignore. 

Six S&P 500 sectors trade in negative territory, with a notable loss in the information technology sector (-0.8%) contributing to losses in the S&P 500 (-0.2%) and Nasdaq Composite (-0.3%). 

Chipmakers are under pressure today following downside guidance from Applied Materials (AMAT 161.96, -26.28, -13.96%) and reports that President Trump may announce chip and semiconductor tariffs as early as next week. The PHLX Semiconductor Index is down 2.3% today, leaving it with a week-to-date gain of 1.3%.

Intel (INTC 25.46, +1.61, +6.75%) is a bright spot in the semiconductor realm, trading higher following a Bloomberg report that the Trump administration is exploring a potential equity stake in the chipmaker, possibly utilizing funds from the CHIPS and Science Act.

Elsewhere, the health care sector (+1.6%) is the best-performing S&P 500 sector, benefiting from UNH's strong showing, while Alphabet (GOOG 206.96, +3.14, +1.54%) and Meta Platforms (META 791.20, +9.07, +1.16%) prop up the communication services sector (+1.3%) and prevent further losses in the S&P 500 (-0.2%) and Nasdaq Composite (-0.3%). 

Reviewing today's data:

• July Retail Sales 0.5% (Briefing.com consensus 0.5%); Prior was revised to 0.9% from 0.6%, July Retail Sales ex-auto 0.3% (Briefing.com consensus 0.3%); Prior was revised to 0.8% from 0.5%
  • The key takeaway from the report, which isn't adjusted for inflation, is that it reflects a decent pace of consumer spending that isn't owed entirely to price increases; however, it does reveal a few points of spending caution, evidenced by the 0.6% decline in electronics and appliance stores, the 1.0% decline in building material and garden equipment and supplies dealers, and the 0.4% decline in food services and drinking places.
• August Empire State Manufacturing 11.9 (Briefing.com consensus 0.0); Prior 5.5
• July Import Prices 0.4%; Prior was revised to -0.1% from 0.1%
• July Import Prices ex-oil 0.3%; Prior was revised to -0.3% from 0.1%
• July Export Prices 0.1%; Prior 0.5%
• July Export Prices ex-ag. 0.1%; Prior 0.5%
• July Industrial Production -0.1% (Briefing.com consensus -0.1%); Prior was revised to 0.4% from 0.3%, July Capacity Utilization 77.5% (Briefing.com consensus 77.5%); Prior was revised to 77.7% from 77.6%
  • The key takeaway from the report is that industrial production activity was muted in July, with manufacturing output stalling due to output declining in all nondurable categories.
• June Business Inventories 0.2% (Briefing.com consensus 0.1%); Prior 0.0%
• August Univ. of Michigan Consumer Sentiment - Prelim 58.6 (Briefing.com consensus 61.3); Prior 61.7
  • The key takeaway from the report is that it marked the first downturn in consumer sentiment in four months, driven by rising worries about inflation.