U.S. equities bounced around the unchanged line on Thursday in another listless session. The tape felt heavier than the closing numbers suggest, however, with large-cap stocks spending most of the session in negative territory.
In the end, the Dow Jones Industrial Average lost 0.1%, the S&P 500 lost a fraction, the Nasdaq Composite gained 0.1% and the Russell 2000 gained a fraction. Treasury bonds were stronger, the dollar was under pressure, gold gained 0.3% and crude oil fell 0.8%.
Breadth was mixed and volume light, with 88% of the NYSE’s 30-day average trading hands. Telecoms led the way with a 1.4% gain with materials the laggards, down 0.8%.
Beleaguered mall anchor Sears Holding Corp (NASDAQ:SHLD) gained 10.6% after announcing the launch of Kenmore smart Alexa-enabled appliances. ATV maker Polaris Industries Inc. (NYSE:PII) gained 4.3% on a second-quarter earnings and revenue beat driven by strong sales. Guidance looked good as well, with dealer inventories low. And Nike Inc (NYSE:NKE) gained 2.3% on an upgrade to “overweight” at Morgan Stanley on what they see as a bottoming in earnings power and North American sales growth.
Click to Enlarge The big story of the day wasn’t Q2 earnings, something about the Federal Reserve or the latest economic data point. It was all about politics on reports Special Council Robert Mueller is looking into President Donald Trump’s business transactions as part of the investigation into Russia’s meddling into last year’s election.
In the wake of this week’s failure to move healthcare legislation out of the GOP-controlled Senate, President Trump’s agenda looks to be fully stalled; an agenda, including proposed tax cuts, infrastructure spending, and more that was the catalyst for the stock market’s powerful post-election rally.
Without these tailwinds (Goldman Sachs months ago said tax cuts were more a 2018 story anyway) the U.S. economy is looking pretty tepid: The Atlanta Fed’s GDPNow estimate of Q2 growth is at just 2.5%, down from a high of more than 4% as recently as May. The New York Fed’s Nowcast estimate is even worse, at 1.9%.
Without a kick in the pants from some fiscal stimulus, this lukewarm growth will eventually weigh on very optimistic corporate earnings expectations. And thus, further extend equity multiples. Eventually, sentiment and then price will pay heed to the changing reality on the ground.
Check out Serge Berger’s Trade of the Day for July 21.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
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