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Stock market stages big reversal as yields stabilized
07-Aug-19 16:15 ET
Dow -22.45 at 26007.07, Nasdaq +29.56 at 7862.84, S&P +2.21 at 2883.98

https://www.briefing.com/investor/markets/stock-market-update/2019/8/7/stock-market-stages-big-reversal-as-yields-stabilized-.htm

[BRIEFING.COM] The stock market staged a big reversal on Wednesday in which the S&P 500 increased 0.1% after being down as much as 2.0% shortly after the open. A steep drop in U.S. Treasury yields contributed to the early sell-off, but selling pressure was abated soon after yields stabilized.

The Nasdaq Composite (+0.4%) also finished higher after beginning sharply lower, while the Dow Jones Industrial Average (-0.1%) and Russell 2000 (-0.1%) finished just below their flat lines.

Treasury yields have been on a steady decline since November, but a sharp acceleration that further flattened the yield curve today was startling to see. Investors piled into the safe-haven asset amid familiar growth concerns and expectations that global central banks will continue to lower rates.

Central banks from New Zealand, India, and Thailand cut interest rates sharper than expected on Wednesday with New Zealand's RBZN Governor indicating that rates may go negative. Negative rates around the world has been a phenomenon that has presumably increased interest in U.S. Treasuries.

Nevertheless, much like Tuesday's session, initial gloom and doom quickly turned into an opportunistic mindset throughout the day. Six of the 11 S&P 500 sectors finished in the green, led by solid gains in the materials (+1.3%), consumer staples (+1.2%), and real estate (+0.9%) sectors.

On the downside, the financials sector (-1.2%) underperformed amid some yield-curve flattening, which isn't too conducive for lending activity should it continue. The energy sector (-0.8%) fell alongside oil prices ($51.14/bbl, -$2.70, -5.0%) that were pressured by bearish inventory data and growth concerns.

The 2-yr yield finished three basis points lower at 1.58% after touching 1.53% at its low, and the 10-yr yield finished six basis points lower at 1.68% after touching 1.61% at its low. The U.S. Dollar Index finished flat at 97.62. Low rates and growth concerns continued to boost gold ($1505.9/oz, +$33.30, +2.3%), which at one point today provided investors a higher return than the S&P 500 this year.

In earnings news, Dow component Walt Disney (DIS 134.86, -7.01, -4.9%) fell nearly 5% after it missed top and bottom-line estimates. CVS Health (CVS 58.12, +4.03, +7.5%) and Match Group (MTCH 91.77, +17.86, +24.2%) climbed on positive results and guidance.

Reviewing Wednesday's economic data, which included the Consumer Credit report for June and the weekly MBA Mortgage Applications Index:

Consumer credit increased by $14.6 bln in June (Briefing.com consensus $16.5 bln) after increasing a revised $17.8 bln (from $17.1 bln) in May.
The key takeaway from the report is that the June increase in consumer credit was driven entirely by growth in nonrevolving credit, like auto and student loans. This marks a return to a dynamic that was seen earlier this year.
The weekly MBA Mortgage Applications Index increased 5.3% following a 1.4% decline in the prior week.

Looking ahead, investors will receive the weekly Initial and Continuing Claims report and Wholesale Inventories for June on Thursday.

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