Economic Events and Earnings for August 22

Published: Thu, 08/21/14

[BRIEFING.COM] The stock market ended the Thursday session on an upbeat note with blue chips showing relative strength for the second consecutive day. The Dow Jones Industrial Average (+0.4%) and S&P 500 (+0.3%) settled ahead of the Russell 2000 (+0.2%) and the Nasdaq Composite (+0.1%). It is worth mentioning the benchmark index posted its fourth consecutive gain, registering a new record closing high at 1992.38.

Equity indices climbed out of the gate thanks to early strength among the four counter cyclical sectors. Despite the early out performance, the defensively-oriented sectors ended below their opening highs, while the six cyclical groups were mixed. Financials (+1.1%) and technology (+0.5%) contributed to the modest advance, while other heavily-weighted groups like consumer discretionary (-0.1%), industrials (unch), and energy (unch) kept the market from going on a bigger run.

The health care sector (+0.1%) was an early leader, but finished near its low amid weakness in biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 264.45, -2.40) ended lower by 0.9% after spending the session in a steady retreat. The ETF succumbed to profit taking after soaring 6.0% since last Tuesday.

In addition to pressuring the health care sector, biotechnology weighed on the Nasdaq, but the relative strength of the tech sector helped the index finish in the green. Intel (INTC 35.15, +0.65) and IBM (IBM 191.23, +1.13) posted respective gains of 1.9% and 0.6%, while Hewlett-Packard ( HPQ 37.00, +1.88) jumped 5.4% after reporting in--line earnings.

Elsewhere, the financial sector spent the session in a steady climb. Bank of America (BAC 16.16, +0.64) was a notable standout, surging 4.1% after confirming its settlement with the Department of Justice, which is expected to negatively impact Q3 earnings by about $0.43 per share. The magnitude of today's advance on heavy volume suggests participants believe a big overhang is now gone and the bank can realize its full potential by focusing on its core business rather than being preoccupied with litigation.

The remaining cyclical sectors lagged throughout the day with the consumer discretionary space spending the session near its flat line. Retailers struggled following disappointing earnings from Sears Holdings (SHLD 33.38, -2.57),Kirklands (KIRK17.30, -1.68), Buckle (BKE 48.78, +1.70), Bon-Ton Stores (BONT 10.21, +1.16), and Dollar Tree (DLTR 54.28, -0.72). The broader SPDR S&P Retail ETF ( XRT 87.49, -0.19) shed 0.2%. On the upside, L Brands(LB 63.72, +0.74) gained 1.2% after reporting a one-cent beat.

Despite the gains in equities, Treasuries maintained a bullish bias throughout the session. The 10-yr note added seven ticks with its yield slipping two basis points to 2.41%.

Participation remained below average with just over 550 million shares changing hands at the NYSE.

Economic data included Initial Claims, Existing Home Sales, Philadelphia Fed Survey, and Leading Indicators:

The initial claims level fell to 298,000 from an upwardly revised 312,000, while the Briefing.com consensus expected a decline to 308,000
- The Department of Labor reiterated that there were no special factors that influenced the initial claims level, suggesting the reading resulted from an improvement in labor market conditions
Existing home sales increased 2.4% to 5.15 million SAAR in July from a slightly downwardly revised 5.03 million SAAR (from 5.04 million) in June, while the Briefing.com consensus expected a decline to 5.00 million SAAR
- This was the fourth consecutive monthly gain and contrasted with the downward move in both the Pending Home Sales Index and MBA Mortgage Purchase Index
- Sales are down 4.3% from a year ago
The Philadelphia Fed's Business Outlook Survey increased to 28.0 in August from 23.9 in July, while the Briefing.com consensus expected a drop to 15.5
- The strength in the headline result is confusing and masks an oddly weaker subset of data
  - Outside of the headline result, the only gains came from the average workweek index (13.3 from 12.5) and inventories (8.3 from 4.8)
The Conference Board's Index of Leading Indicators increased 0.9% in July after increasing an upwardly revised 0.6% (from 0.3%) in June, while the Briefing.com consensus expected an increase of 0.6%