The Week In Review

8/3-8/7/15

The major averages closed out the first week of August on a lower note with the S&P 500 losing 0.3%. The benchmark index settled just above its 200-day moving average (2,073) after testing that level for the first time since last Monday while the Nasdaq Composite (-0.3%) made the first intraday appearance below its 100-day moving average (5,037) since early July. For the week, the S&P 500 lost 1.3% while the Nasdaq Composite surrendered 1.7%.

The market declined for the second consecutive day with today's retreat lubricated by the July Nonfarm Payrolls report (215,000; Briefing.com consensus 229,000), which was good enough to leave the door open for a fed funds rate hike in September.

Things didn't look that bad by the end as equities rebounded during afternoon action with the S&P 500 erasing more than half of its loss. Meanwhile, the Nasdaq Composite was down more than 1.0% at its worst point, but recovered about 70% of that decline.

With the market gearing up for a rate hike in September, the post-NFP weakness in equities was not that surprising; however, strength in the Treasury market was. Specifically, the 10-yr note stumbled immediately after the Nonfarm Payrolls report was released, but recovered that loss in the following minutes and continued higher throughout the day. As a result, the benchmark 10-yr yield fell five basis points to 2.17%, registering its fourth consecutive weekly decline. To be fair, the 2-yr note ended in the red with its yield climbing two basis points to 0.72%.

The lower Treasury yields at the long end of the curve gave a boost to the high-yielding utilities sector (+1.2%), which climbed to a two-month high. Meanwhile, seven of the remaining nine sectors posted losses while financials (+0.1%) and technology (+0.1%) registered slim gains.

The financial sector benefited from the growing rate hike expectations while technology outperformed thanks to relative strength in Apple (AAPL 115.52, +0.39) and high-beta chipmaker names. For its part, Apple spent the day inside a narrow range, but still lost 5.0% for the week after sliding below its 200-day moving average (121.18) on Monday. Meanwhile, chipmakers stayed ahead of the market throughout the day with NVIDIA (NVDA 22.98, +2.53) spiking 12.4% after reporting better than expected earnings and revenue. The broader PHLX Semiconductor Index rose 0.6%.

Elsewhere among cyclical sectors, energy (-1.9%) remained pressured as crude oil futures marched lower throughout the day. The energy sector ended the week lower by 3.6% while WTI crude fell 1.7% to $43.87/bbl, ending the week with a 7.4% loss.

Also of note, the health care sector (-0.2%) paced the early decline, but erased the bulk of its loss by the close. Biotechnology appeared to be the driver as the iShares Nasdaq Biotechnology ETF (IBB 368.67, -1.41) lost 0.4% after briefly crossing its 100-day moving average for the first time since late April. The high-flying ETF surrendered 3.8% for the week, but remains higher by 17.7% since the end of 2014.

Today's participation was roughly in-line with average as 810 million shares changed hands at the NYSE floor.

Taking another look at today's data, nonfarm payrolls added 215,000 jobs in July after adding an upwardly revised 231,000 in June while the Briefing.com consensus expected an increase of 229,000. Private payrolls added 210,000 jobs in July, down from an upwardly revised 227,000 from June while the consensus expected an increase of 220,000.

Average hourly earnings increased 0.2% in July after remaining flat in June while the average hourly workweek increased to 34.6 hours from 34.5. Taken altogether, aggregate earnings increased 0.7% after increasing 0.1% in June.

The July employment report fit in exactly with what the Fed is looking for. Job growth remained relatively robust after exceeding 200,000 for a third consecutive month, and the 0.7% increase in aggregate earnings should bolster consumption growth.

Separately, consumer credit increased by $20.70 billion in June after increasing by an upwardly revised $16.50 billion (from $16.10 billion) in May while the Briefing.com consensus expected an increase of $17.00 billion.

Monday's session will be free of economic data.

Nasdaq Composite +6.1% YTD

S&P 500 +0.9% YTD

Russell 2000 +0.2% YTD

Dow Jones Industrial Average -2.6% YTD

Week in Review: Nasdaq Leads Stocks Lower

The stock market began August on a defensive note with a retreat that sent the S&P 500 below its 50-day (2,099) moving average. The benchmark index was down as much as 0.8%, but narrowed its loss to 0.3% by the close, ending ahead of the Dow Jones Industrial Average (-0.5%). Equities hovered near their flat lines during morning action after the overnight session saw more selling in China. To that point, the Shanghai Composite lost 1.1% after the official Manufacturing PMI hit a five-month low (50.0; expected 50.2) while the Non-Manufacturing PMI improved to 53.9 from 53.8, representing a five-month high. Meanwhile, eurozone economies reported Manufacturing PMI readings that were mostly better than expected while economic data from the U.S. contributed to the weakness in the stock market as Construction Spending (+0.1%; Briefing.com consensus 0.6%) and the ISM Manufacturing Index (52.7; consensus 53.7) missed expectations. Treasuries spiked after the release economic data, which sent the 10-yr yield lower by four basis points to 2.15%, representing the lowest level since the start of June. That decline in yields was a supportive factor for the utilities sector, which gained 0.6%. Similar to utilities, consumer staples (+0.3%) and telecom services (+0.2%) posted gains while the health care sector (unch) settled just above its flat line.

The market registered its third consecutive decline on Tuesday with the S&P 500 shedding 0.2% while the Dow Jones Industrial Average (-0.3%) underperformed. Equity indices spent the first half of the trading day near their flat lines with the S&P 500 bouncing inside a six-point range. The benchmark index made a brief appearance in the green, but could not build on that momentary gain as the top-weighted technology sector (-0.7%) weighed. Specifically, Apple (AAPL 114.64, -3.80) was down as much as 4.4% in the early going, which kept a lid on the market. The tech heavyweight narrowed its loss to 3.2% by the close, ending near levels last seen in late January. Similar to Apple, most large cap tech components registered losses while chipmakers also underperformed with the PHLX Semiconductor Index falling 1.1% to widen its 2015 decline to 7.2%.

The stock market snapped its three-day skid on Wednesday with the S&P 500 climbing 0.3%. The benchmark index settled behind the Nasdaq Composite (+0.7%), but ahead of the Dow Jones Industrial Average (-0.1%), which ended in the red. The trading day began with gains, but the early strength was just a mirage for the Dow Jones Industrial Average as the price-weighted index retreated from its opening high and spent the afternoon near its flat line. Most notably, shares of Disney (DIS 110.53, -11.16) pressured the index throughout the day after the company reported earnings. Disney delivered a three-cent beat, but that was overshadowed by a poor showing from its media and parks & resorts segments. In addition to pressuring the Dow, Disney's results broadsided other media names, resulting in a 1.1% decline for the consumer discretionary sector even as retailers outperformed with SPDR S&P Retail ETF (XRT 98.99, +1.10) climbing 1.1%. Furthermore, Time Warner (TWX 79.80, -7.85) reported better than expected results, but the stock fell victim to industry-wide selling pressure, ending lower by 9.0%.

The key indices endured a broad-based retreat on Thursday with the move paced by the Nasdaq Composite. The tech-heavy index lost 1.6% while the Dow Jones Industrial Average and S&P 500 surrendered 0.7% and 0.8%, respectively, ahead of Friday's Nonfarm Payrolls report for July. Equities opened just above their flat lines, but the S&P 500 dipped into the red and slid below its 100-day moving average (2,098) during the opening hour. Eight of ten sectors settled in the red with the consumer discretionary space (-1.3%) showing notable weakness for the second day in a row. Specifically, media names weighed on discretionary shares once again with Viacom (VIAB 44.10, -7.31) tumbling 14.2% after reporting in-line results on light revenue. Similarly, Viacom's peer 21st Century Fox (FOXA 29.87, -2.05) sank 6.4% despite reporting a bottom-line beat while Disney (DIS 108.55, -1.98) lost 1.8% after plunging 9.2% on Wednesday.