Closing Summary: Cyclical Sectors Rally to Start the Week

The stock market began the new trading week on an upbeat note with small caps leading the charge. The Russell 2000 gained 1.5%, while the S&P 500 advanced 0.9% with eight sectors posting gains. 

 

Equity indices surged out of the gate and spent the entire afternoon in narrow ranges near their highs. Although the Russell 2000 paced the rally, the small-cap index could not climb above its 50-day moving average (1159), which served as resistance. 

 

The opening push took place after the reports that weighed on risk sentiment on Friday were refuted over the course of the weekend. To recap, comments made by Ukrainian officials on Friday suggested that a direct confrontation took place between Russian forces and Ukrainian troops, but those accounts were called into question by several parties, including the White House. 

 

In addition to boosting equities, the news weighed on safe-haven assets. The 10-yr note spent the day in a steady retreat, which pushed its yield up five basis points to 2.39%. Similarly, Germany's 10-yr note retreated, which sent its yield back above the 1.0% mark to 1.01%. 

 

Cyclical sectors displayed broad strength as five of six growth-oriented groups finished ahead of the broader market. The industrial sector (+1.5%) seized the lead in the early going and held on until the close with help from transport stocks. The Dow Jones Transportation Average jumped 1.7% to extend its August gain to 3.2%. Airlines led with United Continental (UAL 47.84, +1.83) climbing 4.0%. 

 

Elsewhere, the top-weighted sector--technology (+1.1%)--also finished ahead of the S&P 500 even as chipmakers were unable to keep pace after Goldman Sachs downgraded the entire semiconductor space. The PHLX Semiconductor Index was limited to a modest gain of 0.5%. However, large cap components picked up the slack with the likes of Apple (AAPL 99.16, +1.18) and Google (GOOGL 592.70, +8.99) ending higher by 1.2% and 1.5%, respectively. 

 

Also of note, the consumer discretionary sector (+0.9%) benefitted from M&A activity as Dollar General (DG 64.14, +6.68) offered to acquire Family Dollar (FDO 79.81, +3.75) for $78.50/share, which represents a 3.2% premium to Friday's closing price. 

 

Despite the broad strength, one cyclical group spun its wheels throughout the session. Specifically, the energy sector (+0.3%) ended near its flat line, while crude oil fell 0.9% to $97.31/bbl. 

 

On the countercyclical side, telecom services (-0.1%) and utilities (-0.2%) registered slim losses, while consumer staples (+0.6%) and health care (+0.8%) finished a bit behind the broader market. 

 

Participation was below average with fewer than 600 million shares changing hands at the NYSE. 

 

Economic data was limited to the NAHB Housing Market Index for August, which rose to 55 from 53, while the Briefing.com consensus expected the reading to hold at 53. 

 

Tomorrow, July CPI (Briefing.com consensus 0.1%), July Housing Starts (consensus 964K), and Building Permits (consensus 1.001 million) will all be reported at 8:30 ET.

Nasdaq Composite +7.9% YTD 

S&P 500 +6.7% YTD 

Dow Jones Industrial Average +1.6% YTD 

Russell 2000 -0.5% YTD

 

 

Time	Cur.	Imp.	Event	Actual	Forecast	Previous
Tuesday, August 19
07:45	USD		Chain Store Sales (YoY)			3.2%
07:45	USD		Chain Store Sales (WoW)			-1.4%
08:30	USD		Building Permits		1.000M	0.973M
08:30	USD		Building Permits (MoM)		2.5%	-4.2%
08:30	USD		Core CPI (MoM)		0.2%	0.1%
08:30	USD		Core CPI (YoY)		1.9%	1.9%
08:30	USD		CPI (MoM)		0.1%	0.3%
08:30	USD		CPI (YoY)		2.0%	2.1%
08:30	USD		Housing Starts		0.969M	0.893M
08:30	USD		Housing Starts (MoM)		8.6%	-9.3%
08:30	USD		Real Earnings (MoM)		0.1%	0.0%
08:55	USD		Redbook (MoM)			1.1%
08:55	USD		Redbook (YoY)			4.8%
11:30	USD		4-Week Bill Auction			0.040%
11:30	USD		52-Week Bill Auction			0.110%
11:30	USD		Cleveland CPI (MoM)			0.2%
16:30	USD		API Weekly Crude Stock			2.000M
16:30	USD		API Weekly Distillates Stocks			-2.600M
16:30	USD		API Weekly Gasoline Stock			2.700M