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23/08/22 Briefing




Today's trade was marked by a lack of conviction on either side of the tape. The major indices could not escape their narrow trading ranges and closed with modest losses. Market participants were playing a waiting game ahead of Fed Chair Powell's speech at the Jackson Hole Economic Policy Symposium on Friday. The 10-yr note yield remaining above 3.00%, rising oil prices, and a weak July new home sales report also acted as limiting factors today.

Market breadth reflected the general lack of conviction with advancers roughly in line with decliners at both the NYSE and Nasdaq at the close.

Mixed action left mega caps in line with the broader market while growth stocks were in line with value stocks. The Vanguard Mega Cap Growth ETF (MGK), Invesco S&P 500 Equal Weight ETF (RSP), and S&P 500 all closed with a modest loss. The Russell 3000 Growth Index and the Russell 3000 Value Index both closed little changed on the day.

Notably, small caps fared somewhat better than their peers. The Russell 2000 closed with a 0.3% gain.

Energy was the only area of the market with concerted buyer interest. The S&P 500 energy sector closed way ahead of the broader market, up 3.6%. It was boosted by an upside move in WTI crude oil futures ($93.76, +3.13, +3.5%) following reports that suggested OPEC+ is likely to cut production or reduce the rate of its production increase at, or before, its September 5meeting.

On the flip side, natural gas futures started the day higher but saw a sharp downside move following an update from Freeport LNG. The company is anticipating its liquefaction facility will be at full capacity by March 2023 with initial production starting mid-November. Natural gas futures settled 5.0% lower at $9.25/mmbtu.

Treasury yields made big downside moves after the weak economic data this morningbut did not maintain that downward momentum. The 10-yr note yield, which was at 3.07% before the data, fell to 2.99% but settled the day at 3.05%. The 2-yr note yield was at 3.32% ahead of the reports, but settled at 3.28%.

Economic data tomorrow includes:

  • Weekly MBA Mortgage Applications Index (prior -2.3%) at 7:00 a.m. ET

  • July Durable Orders (Briefing.comconsensus 0.6%; prior 1.9%) and Durable Orders, Ex-Transportation (Briefing.comconsensus 0.1%; prior 0.3%) at 8:30 a.m. ET

  • July Pending Home Sales (Briefing.comconsensus -3.0%; prior -8.6%) at 10:00 a.m. ET

  • Weekly EIA Crude Oil Inventories (prior -7.056M) at 10:30 a.m. ET

Reviewing today's economic data:

  • New home sales declined 12.6% month-over-month in June to a seasonally adjusted annual rate of 511,000 units (Briefing.comconsensus 580,000) from a downwardly revised 585,000 (from 590,000) in June. On a year-over-year basis, new home sales were down 29.6%.

  • The key takeaway from the report is that it reflects the adverse impact of rising mortgage rates and high home prices on overall demand. That impact is evident in the increased supply of new homes for sale, the shrinking percentage of new homes sold for $399,999 or less, and the significant decline in new home sales on a year-over-year basis.

  • The August IHS Markit Manufacturing PMI preliminary reading was 51.3 versus a prior reading of 52.2.

  • The August IHS Markit Services PMI preliminary reading was 44.1 versus the prior reading of 47.3.

Dow Jones Industrial Average: -9.4% YTD S&P 400: -11.3% YTD S&P 500: -13.4% YTD Russell 2000: -14.5% YTD Nasdaq Composite: -20.9% YTD

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The S&P 500 futures are up 3 points and are trading % above fair value. The Nasdaq 100 futures are up 9 points and are trading roughly in-line with fair value. The Dow Jones Industrial Average futures