Market Remain Resilient
KR Opinion
As we enter the final stretch of the week, I've been closely monitoring the market's movement toward the 40-day and 21-day moving averages on both the S&P and NASDAQ.
Overnight, we essentially hit these targets, followed by a notable reversal. This rebound came in the wake of NVIDIA's earnings report, which, interestingly, exceeded expectations. Despite this positive news, the market's initial reaction was adverse, pushing NVIDIA's stock down by 6-8%.
The overnight action has been quite remarkable. We've witnessed a sharp rebound as the broader market dismisses the initial negative reaction to NVIDIA. Seeing this positive momentum even as NVIDIA's stock remains down is fascinating. This disconnect highlights the complex dynamics at play in the current market environment.
Looking ahead to the next couple of days, we have some potentially impactful reports on the horizon. The GDP revision is coming up, and while most analysts aren't expecting significant changes, it will reaffirm that the economy is performing better than many are willing to acknowledge. This could have exciting implications for market sentiment and sector rotation.
As we head into the open session tomorrow, I anticipate we'll continue to see this sideways, choppy pattern characteristic of recent trading. The market's reaction to NVIDIA once regular trading hours begin will be crucial to watch.
It will be interesting to see how traders interpret the earnings report in the light of day and whether the initial after-hours reaction holds or reverses.
Despite these short-term fluctuations, we remain locked in a broader trading range. I don't foresee any imminent catalysts that could dramatically push the market in either direction. However, we should keep a close eye on the upcoming claims and continuing claims reports. These have become increasingly significant in recent weeks, often triggering notable market volatility.
It's worth noting that while the employment numbers were substantially revised recently, the week-to-week claims numbers are adjusted fairly quickly.
This rapid adjustment lends these figures a degree of accuracy that might make them even more important than the monthly employment reports. Given the questions surrounding the accuracy of the monthly data, market participants may scrutinize these weekly figures more closely.
As we navigate this choppy market, staying nimble and ready to adapt to new information is crucial. While we're in a trading range, opportunities for tactical moves still exist, particularly around these key moving averages and in response to economic data releases.
Looking Back on Wednesday’s Action
In today's market wrap-up, we saw mixed results across sectors. The major indices closed lower but recovered somewhat from their session lows. The S&P 500 ended the day down 0.6%, while the Nasdaq Composite finished 1.1% lower.
The day's losses were primarily driven by weakness in mega-cap stocks and semiconductor-related shares as investors braced for upcoming earnings reports from these key sectors. The PHLX Semiconductor index took a notable hit, dropping 1.8%, while the Vanguard Mega Cap Growth ETF fell 1.1%.
In contrast, as represented by the Invesco S&P 500 Equal Weight ETF, the broader market saw a more modest decline of 0.3%, highlighting the outsized impact of large-cap stocks on overall index performance.
The information technology sector was particularly hard-hit, declining 1.3%. Super Micro Computer (SMCI) stood out as the day's biggest loser in the S&P 500, plummeting 19% on news of a delayed annual filing. Other notable decliners included Bath & Body Works (BBWI) and J.M. Smucker (SJM), reacting to their latest quarterly results.
On a positive note, the financial and healthcare sectors achieved gains, ending as the only two sectors in the green. Bank stocks performed well, with the SPDR S&P Bank ETF and SPDR S&P Regional Banking ETF posting gains. During the session, Berkshire Hathaway also contributed to the financial sector's strength, briefly surpassing a $1 trillion market capitalization.
Trading volume remained below average at the NYSE, continuing a trend observed throughout the week as investors approach the Labor Day holiday.
In the bond market, the 10-year Treasury yield edged up one basis point to 3.84%, while the 2-year yield dipped three basis points to 3.87%.
· S&P 500: +17.2% YTD
· Nasdaq Composite: +17.0% YTD
· S&P Midcap 400: +10.0% YTD
· Dow Jones Industrial Average: +9.0% YTD
· Russell 2000: +8.0% YTD
Reviewing Wednesday's economic data:
· Weekly MBA Mortgage Applications Index 0.5%; Prior -10.1
As we approach the end of the week, investors eagerly anticipate a slew of economic data releases scheduled for Thursday. These reports are expected to provide valuable insights into the health of the U.S. economy and may influence market sentiment.
At 8:30 ET, we'll see the second estimate of Q2 GDP, which previously stood at 2.8%, and the Q2 GDP Deflator, which stands at 2.3%. These figures will offer a more refined view of economic growth and inflation for the second quarter.
The weekly jobless claims report will also be released at this time. Last week's Initial Claims were 232,000, while Continuing Claims were 1.863 million.
Trade and inventory data will round out the 8:30 ET releases. The advance in July goods trade balance, previously at $96.6 billion, will shed light on international trade dynamics.
At 10:00 ET, the housing market will be examined with the release of July Pending Home Sales. The KR Forecast consensus anticipates a 1.2% increase, following a 4.8% rise in the previous report.
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