Stock Market Update

[BRIEFING.COM] The stock market closed modestly higher on Tuesday, extending yesterday's muted action as investors navigate profit-taking from Friday's rally and developments around monetary policy expectations.

The Nasdaq Composite (+0.4%) entered positive territory for the week, while the S&P 500 (+0.4%) finished with a similar gain, and the DJIA (+0.3%) finished with a slightly narrower gain.

Small-cap names outperformed, with the Russell 2000 climbing 0.8%.

A late-session rally also saw the Vanguard Mega Cap Growth ETF finish with a 0.6% gain for the day

Sector performance was mixed but improved slightly throughout the day, ultimately seeing seven S&P 500 sectors capture gains.

The industrials sector (+1.0%) led the advance, with strength in defense companies seeing the iShares US Aerospace & Defense ETF (+2.2%) notch record highs.

The financials sector (+0.8%) also captured a nice gain as the majority of its constituents traded modestly higher.

The information technology sector (+0.5%) steadily climbed throughout the session, with gains in its chipmaker components resulting in a 1.0% advance in the PHLX Semiconductor Index. NVIDIA (NVDA 181.70, +1.89, +1.05%) traded nicely higher ahead of its earnings report tomorrow afternoon, which is set to be one of the most anticipated happenings this week.

Elsewhere, the health care sector (+0.6%) benefitted from shares of Eli Lilly (LLY 736.10, +40.77, +5.86%) trading higher after announcing positive late-stage results for its experimental oral obesity and diabetes drug, orforglipron. Eli Lilly's gains helped offset a late slide in UnitedHealth (UNH 300.42, -4.44, -1.46%) after headlines crossed that the ongoing criminal probe of the company is broader in scope than its alleged Medicare wrongdoings.

Declines were modest in nature today, as the consumer staples (-0.5%), communication services (-0.3%), real estate (-0.3%), and energy (-0.2%) sectors finished decently above their session lows. 

While there was a fair share of stock-specific headlines throughout the session, the bulk of today's news coverage centered around President Trump's firing of Fed Governor Lisa Cook. Ms. Cook stated through a lawyer that she intends to challenge the legality of the firing and will not resign from her duties, setting up a legal battle.

President Trump stated at a cabinet meeting that he knew there would be a legal fight with the firing of Fed Governor Lisa Cook, and he is prepared for it. The president said he has somebody in mind to replace her, which suggests that he might flip Stephen Miran to her seat since the term is longer.

After a tentative start, rate cut expectations improved as the session progressed, with the CME FedWatch tool now assigning an 89.3% chance of a 25-basis point cut at the September FOMC meeting, up from 83.7% the day prior.

Richmond Fed President Tom Barkin (FOMC non-voter) stated that he forecasts a modest adjustment in rates, citing modest movement in the economy but noting that his forecast could change.

U.S. Treasuries had a mixed showing on Tuesday, as the 10-year note and shorter tenors recovered their losses from Monday, while the long bond underperformed after finishing ahead during yesterday's session. The Treasury complex reached highs shortly after today's $69 billion 2-year note sale, which met solid demand, though foreign interest remained below average.

The 2-year note yield settled down five basis points to 3.68%, the 10-year note yield settled down two basis points to 4.26%, and the 30-year note yield settled up two basis points to 4.91%.

• Nasdaq Composite: +11.6% YTD
• S&P 500: +9.9% YTD
• DJIA: +6.8% YTD
• Russell 2000: +5.8% YTD
• S&P Mid Cap 400: +4.0% YTD

Reviewing today's data:

• July Durable Orders 2.8% (Briefing.com consensus -3.5%); Prior was revised to -9.4% from -9.3%, July Durable Goods - ex transportation 1.1% (Briefing.com consensus 0.1%); Prior was revised to 0.3% from 0.2%
  • The key takeaway from the report is that nondefense capital goods orders excluding aircraft—a proxy for business investment—increased 1.1% in July after falling 0.6% in June, making this a generally positive report.
• June FHFA Housing Price Index -0.2% (Briefing.com consensus -0.1%); Prior was revised to -0.1% from -0.2%
• June S&P Case-Shiller Home Price Index 2.1% (Briefing.com consensus 2.8%); Prior 2.8%
• August Consumer Confidence 97.4 (Briefing.com consensus 96.3); Prior was revised to 98.7 from 97.2
  • The key takeaway from the report is that the August downtick was due to decreases in the Present Situation Index and the Expectations Index, though the overall confidence index has not changed much since the report for May.