Bulls retain control in another record-setting session
25-Aug-20 16:15 ET
Dow -60.02 at 28248.44, Nasdaq +86.75 at 11466.47, S&P +12.34 at 3443.62
briefing.com
[BRIEFING.COM] The S&P 500 (+0.4%) and Nasdaq Composite (+0.8%) rose to fresh record highs on Tuesday, as the market found continued support in the mega-caps following a disappointing consumer confidence report. The Russell 2000 increased 0.2%, while the Dow Jones Industrial Average declined 0.2%.
Six of the 11 S&P 500 sectors closed higher, while five closed lower. The communication services (+1.0%), health care (+0.7%), information technology (+0.5%), and consumer discretionary (+0.5%) sectors outperformed the benchmark index, while the energy (-1.4%) and utilities (-0.9%) sectors declined the most.
Value-oriented cyclical stocks briefly outperformed growth stocks in a continuation trade from yesterday, but this trade was quickly reversed after the Conference Board's Consumer Confidence Index dropped to 84.8 in August (Briefing.com consensus 93.0) from 91.7 in July for its lowest reading since May 2014.
Presumably, there were some concerns that the decline in consumer confidence would translate to less consumer spending, absent another round of fiscal stimulus. In addition, the report overshadowed new home sales surging 13.9% m/m in July to a seasonally adjusted annual rate of 901,000 (Briefing.com consensus 787,000).
Shares of mega-cap companies like Amazon (AMZN 3346.49, +39.03, +1.2%), Facebook (FB 280.82, +9.43, +3.5%), and Alphabet (GOOG 1608.22, +20.02, +1.3%), which have performed well throughout the pandemic, posted strong gains after a slow start. Apple (AAPL 499.30, -4.13, -0.8%) was a notable exception.
In key stock news, Salesforce (CRM 216.05, +7.59, +3.6%), Amgen (AMGN 248.22, +12.65, +5.4%), and Honeywell (HON 164.53, +5.16, +3.2%) will replace Exxon Mobil (XOM 40.89, -1.33, -3.2%), Pfizer (PFE 38.41, -0.43, -1.1%), and Raytheon Technologies (RTX 60.95, -0.93, -1.5%) in the Dow 30 index prior to the open on Aug. 31.
The new entrants into the Dow saw nice gains, while those leaving declined noticeably. Note, the change was enacted to account for Apple's 4:1 stock split, as its lower price would reduce the price-weighted Dow's exposure to the technology sector.
U.S. Treasuries finished the session mostly lower, with longer-dated maturities seeing a bulk of the losses. The 2-yr yield increased one basis point to 0.16%, and the 10-yr yield increased four basis points to 0.68%. The U.S. Dollar Index declined 0.3% to 93.01. WTI crude futures rose 1.7%, or $0.72, to $43.33/bbl.
Reviewing Tuesday's economic data:
- The Conference Board's Consumer Confidence Index declined to 84.8 in August (Briefing.com consensus 93.0) from a downwardly revised 91.7 (from 92.6) in July. The August reading was the lowest reading for the index since May 2014.
- The key takeaway from the report is the understanding that consumers' assessment of current conditions and the short-term outlook retrenched, reflecting most likely the real economic impact of the expiration of enhanced unemployment benefits and difficult labor market conditions that will weigh on discretionary spending activity.
- New home sales surged 13.9% m/m in July to a seasonally adjusted annual rate of 901,000 (Briefing.com consensus 787,000). That was the strongest pace of sales since December 2006 and noticeably higher than the pre-pandemic pace of 774,000 seen in January.
- The S&P Case-Shiller Home Price Index for June increased 3.5% (Briefing.com consensus 3.6%) following a revised 3.6% increase in May (from +3.7%).
- The FHFA Housing Price Index for August increased 0.9% following a revised 0.2% decline (from -0.3%).
Looking ahead, investors will receive Durable Goods Orders for July and the weekly MBA Mortgage Applications Index on Wednesday.
- Nasdaq Composite +27.8% YTD
- S&P 500 +6.6% YTD
- Dow Jones Industrial Average -1.0% YTD
- Russell 2000 -5.8% YTD
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