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Market Snapshot

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

Dow 35484.44 +219.77 (0.62%)
Nasdaq 14765.12 -22.95 (-0.16%)
SP 500 4447.74 +10.99 (0.25%)
10-yr Note -1/32 1.360
NYSE Adv 2175 Dec 1059 Vol 750.0 mln
Nasdaq Adv 2345 Dec 1977 Vol 3.9 bln

Industry Watch
Strong: Materials, Financials, Industrials, Utilities, Energy
Weak: Health Care

Moving the Market

-- S&P 500 and Dow close at record highs in cyclically-driven session

-- July CPI report was better than feared

-- Very strong 10-yr note auction

-- Value outperformed growth stocks

S&P 500 and Dow close at record highs as CPI data calms inflation fears
11-Aug-21 16:15 ET
Dow +219.77 at 35484.44, Nasdaq -22.95 at 14765.12, S&P +10.99 at 4447.74

[BRIEFING.COM] The S&P 500 (+0.3%) and Dow Jones Industrial Average (+0.6%) set intraday and closing record highs on Wednesday, as value/cyclical stocks continued to sport a bullish bias following a better-than-feared Consumer Price Index (CPI) report for July.

The Russell 2000 increased 0.5% after being down as much as 0.8% intraday. The Nasdaq Composite, however, declined 0.2% along with the Russell 1000 Growth Index (-0.2%).

Specifying the data, total CPI increased 0.5% m/m in July, as expected, while core CPI, which excludes food and energy, increased 0.3% m/m (Briefing.com consensus 0.4%). On a year-over-year basis, total CPI was unchanged at 5.4% and core CPI moderated to 4.3% from 4.5%.

The data supported the narrative that inflation rates are peaking, yet the inflation-sensitive 10-yr yield was trading higher for the sixth straight session after the report. It took a very strong 10-yr note auction to bring it back down to its unchanged mark of 1.34% after it traded at 1.37% intraday.

Some rate discomfort might have contributed to the underperformance of the growth stocks, but a willingness to stay invested helped money flow into the value/cyclical stocks. The S&P 500 materials (+1.4%), industrials (+1.3%), and financials (+1.2%) sectors increased by at least 1.0% on Wednesday.

Interestingly, the health care sector (-1.0%) was the only sector in the S&P 500 that closed lower, largely due to weakness in Pfizer (PFE 46.31, -1.88, -3.9%) and Moderna (MRNA 385.33, -71.43, -15.6%). MRNA pulled back 15.6% after doubling between July 9 and August 9. PFE gained about 20% over the past month.

Southwest Air (LUV 51.84, +0.73, +1.4%) issued downside Q3 revenue guidance as the Delta variant caused a deceleration in close-in bookings and an increase in close-in trip cancellations this month. LUV and other airline stocks still posted decent gains, as the news may have been expected since airline share prices had struggled since June.

Separately, Kansas City Fed President George (2022 voter) and Dallas Fed President Kaplan (2023 voter) suggested the Fed should consider tapering asset purchases sooner rather than later, echoing comments from Atlanta Fed President Bostic (2021 voter) and Boston Fed President Rosengren (2022 voter) earlier this week.

The 2-yr yield decreased two basis points to 0.21%. The U.S. Dollar Index decreased 0.2% to 92.90. WTI crude futures rose 1.4%, or $0.94, to $69.27/bbl.

Reviewing Wednesday's economic data:

Total CPI, driven by increases in the indexes for shelter, food, energy, and new vehicles, increased 0.5% month-over-month in July, as expected, while core CPI, which excludes food and energy, rose 0.3% (Briefing.com consensus 0.4%). On a year-over-year basis, total CPI was unchanged at 5.4% and core CPI moderated to 4.3% from 4.5%.
The key takeaway for the market is the moderation in the year-over-year readings, which feeds into the "peak inflation" narrative. That is, the stock market is taking some comfort in the notion that inflation pressures might not be as pronounced in coming months.
The Treasury Budget for July showed a $302.1 bln deficit, versus a $63.0 bln deficit in the same period a year ago. The budget data is not seasonally adjusted, so the July deficit can't be compared to the June deficit of $174.2 bln.
July marked the 22nd consecutive month that the Treasury has seen a budget deficit.
The weekly MBA Mortgage Applications Index increased 2.8% following a 1.7% decline in the prior week.

Looking ahead, investors will receive the Producer Price Index for July and the weekly Initial and Continuing Claims report on Thursday.

S&P 500 +18.4% YTD
Dow Jones Industrial Average +15.9% YTD
Nasdaq Composite +14.6% YTD
Russell 2000 +14.0% YTD

Crude futures settle higher
11-Aug-21 15:25 ET
Dow +232.44 at 35497.11, Nasdaq -29.40 at 14758.67, S&P +10.70 at 4447.45

[BRIEFING.COM] The S&P 500 is trading higher by 0.2% amid gains in ten of its 11 sectors.

One last look at the sector standings shows materials (+1.3%), industrials (+1.1%), and financials (+1.0%) leading the advance with gains of at least 1.0% while the health care sector trades lower by 0.9%.

WTI crude futures settled higher by 1.4%, or $0.94, to $69.27/bbl. On a related note, weekly crude oil inventories decreased by 447,000 barrels after increasing by 3.63 mln barrels during the previous week.