The stock market finished the Tuesday session on the defensive after spending the entire day in a steady retreat. The S&P 500 (-0.6%) posted its third consecutive decline, while the small-cap Russell 2000 (-0.9%) slipped behind the broader market during afternoon action. 

 

Equity indices were pressured from the start following some overnight developments that weighed on sentiment. The market tried to overcome the early weakness, but could not stage a sustained rebound, which resulted in follow-through selling in the afternoon. 

 

Mixed PMI data from the euro zone combined with an announcement from the U.S. Treasury concerning tax inversion deals factored into the cautious action. Under a new notice released by the Treasury Department, an inverted company is subject to potential adverse tax consequences if, after the transaction: (1) less than 25% of the new multinational entity's business activity is in the home country of the new foreign parent, and (2) the shareholders of the old US parent end up owning at least 60% of the shares of the new foreign parent. The same tax treatment would still apply if 80% or more of the new foreign parent is owned by the US parent company's shareholders. 

 

Fittingly, the news caused early weakness in the health care sector (-0.6%), which has been at the center of recent M&A deals. The sector was able to cut its early loss in half, while Dow component Pfizer (PFE 30.05, -0.13) narrowed its loss to 0.4% by the close. The stock received an afternoon boost after Bloomberg reported the company has approached Actavis (ACT 240.87, +5.25) about a potential acquisition. 

 

Elsewhere among influential sectors, financials (-0.7%) and technology (-0.2%) displayed relative strength at the start, but only the tech sector was able to end near its flat line. The top-weighted component, Apple (AAPL 102.64, +1.58), did some heavy lifting, while other influential names like Facebook (FB 78.29, +1.49) and Google (GOOGL 591.18, -6.09) ended mixed. 

 

Outside of technology, the energy sector (-0.3%) was the only other cyclical out performer, while crude oil rose 0.7% to $91.55/bbl. The other commodity-related sector--materials (-0.6%)--ended in line with the market. 

 

Also of note, the industrial sector (-0.8%) struggled amid weakness in defense and transport stocks. The PHLX Defense Index lost 1.2% and the Dow Jones Transportation Average fell 0.8%. 

 

The daylong retreat contributed to increased demand for volatility protection that sent the CBOE Volatility Index (VIX 14.87, +1.18) to its highest level in five weeks. 

 

Treasuries ended on their highs with the 10-yr yield down four basis points at 2.53%. 

 

Today's participation was ahead of recent averages with roughly 700 million shares changing hands at the NYSE floor. 

 

Economic data was limited to the July Housing Price Index from the FHFA, which rose 0.1% to follow a revised increase of 0.3% (from 0.4%) observed during the prior month. 

 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET, while New Home Sales for August (Briefing.com consensus 435K) will cross the wires at 10:00 ET. 

Nasdaq Composite +8.0% YTD 

S&P 500 +7.3% YTD 

Dow Jones Industrial Average +2.9% YTD 

Russell 2000 -3.8% YTD

 

Time	Cur.	Imp.	Event	Actual	Forecast	Previous
Wednesday, September 24
07:00	USD		MBA 30-Year Mortgage Rate			4.36%
07:00	USD		MBA Mortgage Applications (WoW)			7.9%
07:00	USD		MBA Purchase Index			169.3
07:00	USD		Mortgage Market Index			352.9
07:00	USD		Mortgage Refinance Index			1,395.5
10:00	USD		New Home Sales		430K	412K
10:00	USD		New Home Sales (MoM)		4.4%	-2.4%
10:30	USD		Crude Oil Inventories		0.386M	3.673M
10:30	USD		EIA Weekly Distillates Stocks		0.593M	0.279M
10:30	USD		Gasoline Inventories		-0.086M	-1.635M
13:00	USD		5-Year Note Auction			1.646%
13:00	USD		Chicago Fed President Evans Speaks

Earnings Reports for Wednesday September 24