The stock market began the trading week on a cautious note with the S&P 500 (-0.6%) settling just above its 200-day moving average (2,064) while the Nasdaq Composite (-1.0%) underperformed.

Equity indices spent the entire day in negative territory after the overnight session was highlighted by an 8.5% plunge in China's Shanghai Composite, which endured its largest one-day decline in more than eight years. The index widened its slide from June highs to 28.0%, falling to lows during the final hour of action after the International Monetary Fund voiced concerns about the degree of recent government intervention in the market.

In all likelihood, government involvement in the Chinese market will be in focus over the next few weeks, especially if the measures currently being employed fail to halt the ongoing slide. To that point, today's rout was followed by reports that China's government will step up its buying measures, but that report was refuted shortly thereafter.

The overseas weakness weighed on investor sentiment in Europe and the U.S. while German Bunds (10-yr yield -6 bps to 0.65%) and U.S. Treasuries (10-yr yield -4 bps to 2.23%) advanced.

Nine sectors finished the day in negative territory with all six cyclical groups ending in the red. Furthermore, five of six growth-sensitive groups settled behind the broader market while the industrial sector (-0.4%) ended just ahead. Similar to the sector, high-beta transport stocks fared better than the broader market with the Dow Jones Transportation Average shedding 0.2%.

Elsewhere among cyclical groups, the energy sector (-1.4%) settled at the bottom of the leaderboard while crude oil fell to early April levels, ending lower by 1.6% at $47.39/bbl. The energy component retreated despite today's greenback weakness that sent the Dollar Index (96.53, -0.71) lower by 0.7%. On the upside, the utilities (+1.3%) sector posted a solid gain after showing relative strength throughout the day while consumer staples (-0.1%), health care (-0.1%), and telecom services (-0.1%) also outperformed, but could not make it out of the red.

Notably, the health care sector was boosted by a 16.4% surge in Teva Pharmaceutical (TEVA 72.00, +10.15) after the company beat earnings expectations and announced the acquisition of Allergan's (AGN 326.98, +18.77) generics business for $40.50 billion. As for biotechnology, the high-beta group struggled with iShares Nasdaq Biotechnology ETF (IBB 373.58, -4.00) falling 1.1%.

Today's participation was ahead of recent averages with more than 900 million shares changing hands at the NYSE floor.

Economic data was limited to Durable Orders, which increased 3.4% in June after declining an upwardly revised 2.1% (from -2.2%) in May while the Briefing.com consensus expected an increase of 3.0%.

A large portion of the increase resulted from a significant surge in aircraft orders as Boeing (BA 141.03, -3.03) reported 161 aircraft orders in June, up from just 11 in May. That gain helped push defense and nondefense aircraft orders up 52.3%. Excluding transportation, durable goods orders increased 0.8% in June after declining a negatively revised 0.1% (from 0.0%) in May while the consensus expected an increase of 0.5%. 

Tomorrow, the Case-Shiller 20-city Index for May will be released at 8:30 ET (Briefing.com consensus 5.6%) while July Consumer Confidence will be reported at 10:00 ET (consensus 100.0).

 

Nasdaq Composite +6.4% YTD

Russell 2000 +0.9% YTD

S&P 500 +0.4% YTD

Dow Jones Industrial Average -2.2% YTD