Closing Summary: Cyclical Sectors Send Stocks Higher

The stock market kicked off the new trading week on an upbeat note despite enduring a shaky start to the session. The S&P 500 settled higher by 0.7% with nine sectors ending in the green. 

 

Equity indices climbed out of the gate amid upbeat action in Europe where Portugal's Banco Espirito Santo received bailout funds over the weekend. While the actual need for a bailout was not a positive in itself, the news calmed some fears about the stability of the European banking system. 

 

Despite the opening strength, the key indices were back in the red during the first 90 minutes of action, but the out performance of influential sectors like consumer discretionary (+1.0%), financials (+0.8%), and technology (+0.7%) invited dip-buyers into the fold. After a range-bound first half of the session, the indices spent the afternoon in a steady climb to new highs. 

 

Overall, cyclical sectors fared better than defensively-oriented groups with five growth-sensitive sectors ending ahead of the broader market. The energy sector (+1.6%) was an early laggard, but surged into the lead in the afternoon after Colorado officials announced the formation of a task force aimed at minimizing regulatory conflicts in the industry. For its part, crude oil rose 0.4% to $98.27/bbl. 

 

Like energy, the consumer discretionary sector (+1.0%) also added at least 1.0%. The group received all-around support as car makers, home builders, and retailers rallied. Shares of Ford (F 17.02, +0.21) and General Motors (GM 33.61, +0.17) posted respective gains of 1.3% and 0.5% in reaction to strong July sales, while the iShares Dow Jones US Home Construction ETF (ITB 22.36, +0.22) added 1.0%. With regard to retail stocks, the SPDR S&P Retail ETF (XRT 84.57, +0.93) advanced 1.1%, but Michael Kors (KORS 77.01, -4.82) lost 5.9% after its disappointing outlook for Q2 overshadowed its above-consensus results and upbeat full-year guidance. 

 

Elsewhere, the top-weighted S&P 500 sector--technology (+0.7%)--ended in line with the benchmark index. Large cap listings displayed broad strength with Google (GOOGL 582.27, +8.67) and Microsoft (MSFT 43.37, +0.51) both adding near 1.3%, while Apple (AAPL 95.59, -0.54) lagged. The largest tech stock shed 0.6%. 

 

Even though most cyclical groups outperformed, the industrial sector (+0.3%) could not keep pace. Defense contractors pressured the sector (PHLX Defense Index -0.2%), while transport stocks struggled intraday. The Dow Jones Transportation Average added 0.4% to avoid its third consecutive decline. 

 

On the counter cyclical side, consumer staples (+0.4%), health care (+0.5%), and telecom services (+0.6%) benefited from the afternoon rally, while the utilities sector (-0.6%) spent the entire trading day in the red to widen its third quarter loss to 7.1%. 

 

Treasuries registered modest gains with the 10-yr yield slipping one basis point to 2.49%. 

 

Participation was a bit below average with 661 million shares changing hands at the NYSE. 

 

Tomorrow, June Factory Orders (Briefing.com consensus 0.5%) and the ISM Services Index for July (consensus 56.5) will both be reported at 10:00 ET. 

S&P 500 +4.9% YTD 

Nasdaq Composite +5.0% YTD 

Dow Jones Industrial Average UNCH YTD 

Russell 2000 -3.3% YTD

 

07:45	USD		Chain Store Sales (YoY)			4.6%
07:45	USD		Chain Store Sales (WoW)			0.2%
08:55	USD		Redbook (YoY)			3.0%
08:55	USD		Redbook (MoM)			-0.6%

09:45	USD		Services PMI		61.0	61.0
10:00	USD		Factory Orders (MoM)		0.6%	-0.5%
10:00	USD		Factory orders ex transportation (MoM)			-0.1%
10:00	USD		IBD/TIPP Economic Optimism		46.2	45.6
10:00	USD		ISM Non-Manufacturing Employment			54.4
10:00	USD		ISM Non-Manufacturing New Orders			61.2
10:00	USD		ISM Non-Manufacturing PMI		56.3	56.0
10:00	USD		ISM Non-Manufacturing Prices			61.2
11:30	USD		4-Week Bill Auction			0.030%
16:30	USD		API Weekly Crude Stock			-4.400M
16:30	USD		API Weekly Distillates Stocks			0.547M
16:30	USD		API Weekly Gasoline Stock			0.060M