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Stocks lose ground while Treasury yields resume decline
27-Aug-19 16:25 ET
Dow -120.93 at 25777.88, Nasdaq -26.79 at 7826.97, S&P -9.22 at 2869.16

https://www.briefing.com/stock-market-update

[BRIEFING.COM] The stock market finished lower on Tuesday in a shaky session. The S&P 500 jumped 0.7% out of the gate after yesterday's advance, then declined as much 0.6% as Treasury yields took a noticeable leg lower. The broader market spent most of the afternoon wavering in negative territory, leaving the S&P 500 with a 0.3% loss.

The Dow Jones Industrial Average (-0.5%) and Nasdaq Composite (-0.3%) performed similarly to the benchmark index. The Russell 2000 dropped 1.4%, largely due to weakness in many of the energy and financial stocks.

Today's higher start was formed even as traditional safe-haven assets like gold ($1541.30/oz, +$13.80, +0.9%) and U.S. Treasuries saw increased demand and China again denied it held recent phone calls with top U.S. negotiators. The market, perhaps due to some wary (and weary) investors, quickly embarked on a steady retreat while one of strongest consumer confidence readings since October 2000 produced little reaction.

The reaction to the persistent flattening/inversion activity in the U.S. Treasury yield curve was made more evident in the S&P 500 financials sector (-0.7%), which led all sectors in losses on Tuesday. The energy (-0.6%) and health care (-0.6%) sectors followed suit, while the utilities (+0.1%), materials (+0.1%), and communication services (+0.1%) sectors managed to finish in positive territory.

Specifically, the 2s10s spread inversion widened to four basis points, which isn't terribly conducive for lending activity. The 2-yr yield declined two basis points to 1.53%, and the 10-yr yield declined six basis points to 1.49%. The U.S. Dollar Index was little changed at 98.04. WTI crude rose 2.4% to $54.90/bbl.

Johnson & Johnson (JNJ 129.64, +1.84, +1.4%) outperformed despite being found liable in an opioid case in Oklahoma. JNJ was ordered to pay $572 million, which was at the low end of expectations and much less than the $17 billion the state wanted. Johnson & Johnson said it plans to appeal the ruling.

Other corporate news included merger talks between Philip Morris International (PM 71.70, -6.03, -7.8%) and Altria Group (MO 45.25, -1.87, -4.0%). MO surged on the initial news but fell on a subsequent report from CNBC indicating it would own just 41% of the company at no premium. J.M. Smucker (SJM 103.69, -9.24, -8.2%) disappointed investors with its results and lower guidance.

Reviewing Tuesday's economic data, which included the Conference Board's Consumer Confidence Index for August, the FHFA Housing Price Index for June, and the S&P Case-Shiller Home Price Index for June:

The Conference Board's Consumer Confidence Index for August printed at 135.1 (Briefing.com consensus 129.6) versus an upwardly revised 135.8 (from 135.7) in July, which was the third highest reading since October 2000.
The key takeaway from the report is that it reflects a pretty solid state of consumer confidence, which is a supportive foundation for continued discretionary spending. That matters greatly for an economy driven predominantly by consumer spending.
The FHFA Housing Price Index for June increased 0.2% following a revised 0.2% increase in May (from 0.1%).
The S&P Case-Shiller Home Price Index for June increased 2.1% (Briefing.com consensus of 2.7%) following a 2.4% increase in May.

Looking ahead, investors will receive the weekly MBA Mortgage Applications Index on Wednesday.

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