Capital Markets Overview
The stock market increased modestly on Monday, finding support in the technology stocks while market participants eyed a key policy decision from the Federal Reserve later this week. The S&P 500 eked out a gain of 0.1%, finishing near its session lows. The Dow Jones Industrial Average increased 0.1%, the Nasdaq Composite increased 0.6%, and the Russell 2000 increased 0.7%. The Federal Open Market Committee will release its rate decision at the conclusion of its two-day policy meeting on Wednesday. While no rate cut is expected, expectations are high for the Fed to signal it is willing to lower rates sooner rather than later. These high hopes lifted the S&P 500, Dow, and Nasdaq to monthly gains of at least 5.0%, including Monday's advance. With decent gains already registered ahead of the meeting, and still no progress on the U.S.-China trade front, investors showed little conviction in buying the broader market.The S&P 500 sectors finished mixed. The S&P 500 communication services sector (+1.1%) outperformed on the back of Facebook (NASDAQ:FB) (FB 189.01, +7.68, +4.2%) and Netflix (NASDAQ:NFLX) (NFLX 350.62, +10.89, +3.2%). The real estate (+1.1%) and energy (+0.9%) sectors also outperformed, while the financials (-0.9%) and materials (-0.9%) sectors dragged on the broader market. Facebook continued to outperform ahead of the release of its cryptocurrency white paper tomorrow. Many analysts have speculated that its cryptocurrency project will provide new growth opportunities. Netflix benefited from comments out of Piper Jaffray, which expects the company to provide solid Q2 results next month. In M&A news, Array Biopharma (ARRY 46.44, +16.85, +56.9%) and Sotheby's (BID 56.13, +20.74, +58.6%) agreed to be acquired for hefty premiums of over 60%. Array Biopharma will be acquired by Pfizer (NYSE:PFE) (PFE 42.88, +0.12, +0.3%) for approximately $11.4 billion, or $48 per share, in cash. Sotheby's will be acquired by private investor Patrick Drahi for $3.7 billion, or $57 per share, in cash. U.S. Treasuries finished little changed. The 2-yr yield increased one basis point to 1.85%, and the 10-yr yield decreased one basis point to 2.09%. The U.S. Dollar Index was unchanged at 97.57. WTI crude fell 1.5% to $51.76/bbl.
Reviewing Monday's economic data, which included the Empire State Manufacturing Survey for June and the NAHB Housing Market Index for June:
- The Empire State Manufacturing Survey for June fell to -8.6 from the prior month's reading of 17.8. The 26 point drop was the largest monthly decline on record, sending it comfortably below 0.0, which is the dividing line between expansion and contraction for this report.
- The NAHB Housing Market Index for June came in at 64 (consensus 66), down from 66 from May.
Looking Ahead:
Looking ahead, investors will receive Housing Starts and Building Permits for May on Tuesday.
Top Market drivers:
- Stock market finishes slightly higher ahead of key Fed meeting
- The S&P 500 sectors finished mixed
- Relative strength in Facebook (NASDAQ:FB) and Netflix (NASDAQ:NFLX)
Strong: Real Estate, Communication Services, Energy
Weak: Materials, Financials
