Wednesday, July,29 2020

Capital Markets Overview

Stocks falter into the close ahead of key events

••• The S&P 500 declined 0.7% on Tuesday, pressured by some late selling and a cautious mindset ahead of numerous key events this week. The Dow Jones Industrial Average fell 0.8%, the Nasdaq Composite fell 1.3%, and the Russell 2000 fell 1.0%. Negotiations for the next coronavirus relief bill will occur throughout the week and should be contentious considering House Democrats rebuffed the Senate`s $1 trillion bill and Senate Majority Leader McConnell issued a tough-minded stance on CNBC. In addition, tomorrow will feature the July FOMC policy statement and the House Judiciary Committee`s antitrust hearing, followed by mega-cap earnings on Thursday. The mega-cap stocks accelerated losses into the close after finding renewed strength yesterday, joining stocks within the S&P 500 materials (-2.2%) and energy (-1.8%) sectors as today`s laggards. The defensive-oriented real estate (+2.1%), utilities (+1.6%), and consumer staples (+0.3%) sectors closed higher. Pfizer (PFE 39.02, +1.48, +3.9%) stood out with a 4% gain following the company`s upbeat earnings results and guidance. Fellow Dow components 3M (MMM 155.33, -7.91, -4.9%), McDonald`s (MCD 19624, -5.01, -2.5%), and Raytheon Technologies (RTX 61.00, -0.09, -0.2%) underwhelmed investors with their earnings reports. Other developments that prompted some caution included the Conference Board`s Consumer Confidence Index declining to 92.6 in July ( consensus 95.0) from 98.3 in June and the Fed extending its lending facilities by three months through the end of the year. The latter was a reminder that the economy has struggled longer than hoped. Treasuries finished with modest gains in front of the July FOMC statement tomorrow. The 2-yr yield declined one basis point to 0.14%, and the 10-yr yield declined three basis points to 0.58%. The U.S. Dollar Index increased by 0.1% to 93.77. WTI crude futures fell 1.4%, or $0.58, to $41.04/bbl.
••• Reviewing economic data: 
Reviewing Tuesday`s economic data:
•   The Conference Board`s Consumer Confidence Index slipped to 92.6 in July ( consensus 95.0) from an upwardly revised 98.3 (from 98.1) in June, as reports detailing the resurgence of coronavirus cases and efforts to pause or roll back reopenings because of the resurgence weighed on consumer attitudes.
•   The key takeaway from the report is the recognition that consumers have gotten less optimistic about the short-term outlook and `remain subdued about their financial prospects,` which is a negative portent for consumer spending.
The S&P Case-Shiller Home Price Index for May increased by 3.7% ( consensus 4.1%) following a revised 3.9% increase in April (from +4.0%).
••• Looking Ahead: 
•  Looking ahead to Wednesday, investors will receive the July FOMC policy statement, Pending Home Sales for June, the weekly MBA Mortgage Applications Index, and the Advance June reports for International Trade in Goods, Retail Inventories, and Wholesale Inventories.
••• Stock Market Sectors:
• Strong: Real Estate
• Weak: Financials, Health Care, Information Technology

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