The Week In Review

7/27-7/31/15

The stock market ended July on a cautious note with the S&P 500 shedding 0.2%. Despite today's downtick, the benchmark index added 1.2% for the week, ending the month higher by 2.0%. Meanwhile, the Nasdaq Composite ended flat, locking in a 2.8% gain for July.

Equities held modest gains at the start thanks to a pre-market jump in the futures market after it was reported that the Employment Cost Index increased just 0.2% in the second quarter while the Briefing.com consensus expected an increase of 0.6%. The lack of strong wage growth was viewed as an argument in favor of the Federal Reserve delaying its first rate hike, which gave a boost to equity futures and Treasuries. The 10-yr note surged immediately after the report was released, and remained near its high into the close, sending the benchmark yield lower by six basis points to 2.20%.

Meanwhile, stocks climbed during the first three hours of action, but relative weakness among several cyclical sectors acted as a drag on the broader market, pulling the S&P 500 to new lows during the afternoon.

Most notably, the energy sector tumbled 2.6%, widening its July decline to 7.8% after Dow components Chevron (CVX 88.48, -4.55) and ExxonMobil (XOM 79.21, -3.80) reported disappointing results. The two names posted respective losses of 4.9% and 4.6% while crude oil slid 2.9% to $47.12/bbl. For the month, the energy component plunged more than 21.0%, returning to its January low.

Elsewhere among growth-sensitive sectors, financials (-0.4%) and technology (-0.5%) lagged throughout the day with high-beta chipmakers pressuring the technology sector. The PHLX Semiconductor Index lost 1.2%, ending the month lower by 5.0% while KLA-Tencor (KLAC 53.05, +0.99) bucked the trend, rallying 1.9%, in reaction to a bottom-line beat.

Typically, underperformance in the technology sector tends to be consistent with weakness in the Nasdaq, but the tech-heavy index outperformed today thanks to gains in the biotech space. The iShares Nasdaq Biotechnology ETF (IBB 382.53, +3.73) gained 1.0% after Amgen (AMGN 176.59, +4.90) beat estimates and raised its guidance. Shares of AMGN spiked 2.9% while the broader health care sector (+0.5%) ended among the leaders, drawing secondary support from the likes of Molina Health (MOH 75.28, +7.28), and Universal Health Systems (UHS 145.23, +3.79) after the two reported better than expected results.

Similar to health care, the three other countercyclical groups settled ahead of the broader market. The utilities sector spiked 1.0% while consumer staples (+0.1%) and telecom services (+0.1%) posted slimmer gains.

Today's participation was ahead of recent averages with more than 915 million shares changing hands at the NYSE floor.

Economic data included Employment Cost Index, Chicago PMI, and Michigan Sentiment:

Employment costs rose 0.2% in Q2 2015 after a 0.7% increase in the first quarter while the Briefing.com consensus expected an increase of 0.6% 

That was the smallest increase in employment costs since the index was created in 2001

The Chicago PMI increased to 54.7 in July from 49.4 in June while the Briefing.com consensus expected an increase to 54.7 

The reading represented the first increase in three months

There was a large improvement in production as the related index increased to 61.8 in July from 49.8 in June. The production gain came on the heels of strengthening growth in the new orders index, which rose to 58.5 from 51.7

The University of Michigan Consumer Sentiment Index was revised down to 93.1 in the final June reading from 93.3 in the preliminary report while the Briefing.com consensus expected an increase to 94.0 

The index is down from 96.1 in June, which was the best reading since January

The Expectations Index was revised down from 85.2 in the preliminary reading to 84.1 while the Current Conditions Index was revised up to 107.2 from 106.0

On Monday, June Personal Income/Spending data and Core PCE Prices will be reported at 8:30 ET while June Construction Spending and July ISM Index will both be reported at 10:00 ET.

Nasdaq Composite +8.3% YTD

S&P 500 +2.2% YTD

Russell 2000 +2.8% YTD

Dow Jones Industrial Average -0.7% YTD

Week in Review: Technical Levels in Focus

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. 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%.

Equities snapped their five-day losing streak with a daylong Tuesday rally that sent the S&P 500 higher by 1.2%. The benchmark index tested its 100-day moving average (2,095) during afternoon action while the Nasdaq Composite (+1.0%) underperformed throughout the day. The key indices rebounded from losses registered over the past week, starting the day on an upbeat note after the overnight session saw more volatility in Asia. Specifically, China's Shanghai Composite was down as much as 5.1% at the start of the trading day, but narrowed its loss to 1.7% by the close. The turnaround off session lows coincided with a spike in S&P 500 futures in the wee hours of the morning. All ten sectors posted gains with some of the recent underperformers leading the market higher. To that point, the energy sector surged 2.9% after sliding 4.3% over the past five days. The growth-sensitive sector was lifted by the shares of BP (BP 37.29, +1.24) after the industry giant reported a bottom-line miss on better than expected revenue. Another large sector member, LyondellBasell (LYB 92.46, +2.61) spiked 2.9% in reaction to a bottom-line beat. On a related note, crude oil rose 1.3% to $47.98/bbl, providing added support.

The market registered its second consecutive advance on Wednesday with the S&P 500 climbing 0.7% to extend its weekly gain to 1.4%. The benchmark index overtook its 100- (2,095) and 50-day moving averages (2,100) during morning action while the tech-heavy Nasdaq (+0.4%) struggled to keep pace with the broader market. Equity indices began the day with slight gains after China's Shanghai Composite spiked 3.4% overnight, which improved risk tolerance among global investors. The Dow and S&P 500 rallied throughout the session while the Nasdaq hovered near its opening levels into the afternoon before setting new highs ahead of the close. The tech-heavy index was pressured by biotechnology as iShares Nasdaq Biotechnology ETF (IBB 377.43, -5.41) lost 1.4% despite better than expected earnings from Gilead Sciences (GILD 115.71, +2.64). Shares of GILD spiked 2.3% while the broader health care sector (+0.2%) settled among the laggards. Elsewhere, Twitter (TWTR 31.24, -5.30) sank 14.5% after the company's bottom-line beat was overshadowed by cautious commentary regarding user growth outlook.

The stock market ended the Thursday session on a slightly higher note after rebounding off its opening low. The S&P 500 settled just above its flat line while the Nasdaq Composite (+0.3%) outperformed. Equities faced some early weakness after the overnight session saw renewed selling in China that sent the Shanghai Composite lower by 2.2%. Furthermore, index futures dropped to new lows ahead of the opening bell after the advance reading of Q2 GDP pointed to an expansion of 2.3%, while the Briefing.com consensus expected a reading of 2.5%. Meanwhile, the first quarter reading was revised up to 0.6% from -0.2%. The GDP report was met with a rally in the Treasury market as the 10-yr note spiked off its low and continued advancing into the afternoon, dropping its yield three basis points to 2.26%.