US Stocks End Lower, But Off Session Lows
4:09 pm Thursday, July 08th, 2021
All three main indexes were down 0.8-0.9% in a shift from some of the recent disconnects. The main story was the bounce from the lows. At midday, it looked like it might make the full return trip but it wasn’t meant to be.
The weak start was a function of general de-risking, and profit-taking, efforts as the 10-yr yield traded as low as 1.25% overnight. It’s recovered since then and is now trading at 1.31%, or one basis point below yesterday’s settlement.
Rates have been in a downwards spiral since the 10-yr yield ended last week at 1.43% in part due to peak growth/inflation expectations and short-covering activity. This morning, growth concerns circulated the headlines after Japan extended its state of emergency for Tokyo through the Olympics and banned spectators for the games due to the spread of the Delta variant.
The financials sector (-1.3%) was understandably today’s weakest sector in the S&P 500 given the lower rates while the industrials (-0.8%) and materials (-0.9%) sectors are giving back a bulk of yesterday’s gains. The energy sector (+0.3%) has turned positive alongside oil prices ($72.79/bbl) amid bullish inventory data out of the EIA.
The narrative is slowly shifting from investors being too complacent and one-sided in terms of positioning to investors warming up to the buy-the-dip mindset. The resilient price action is supportive of the view that the growth-oriented headlines likely served as an early excuse to take money off the table.
What’s more, the fact that stay-at-home winner Zoom Video (ZM) was trading lower by 2% suggests that the market isn’t entirely focused on the coronavirus.
Shining some light on today’s winners other than energy, Amazon.com (AMZN), Tesla (TSLA), and several of the airline stocks like American Airlines (AAL) were trading higher right now.
