S&P 500, Nasdaq start August lower while Apple, Amazon earnings and jobs data loom this week

By Frances Yue and Andrew Keshner

U.S. stocks ended mostly lower Tuesday afternoon, pulling back from 16-month highs and a five-month winning streak, while in a wait-and-see mode ahead of jobs numbers and major technology company earnings reports later this week.

How stocks traded

On Monday, the Dow Jones Industrial Average rose 100 points, or 0.28%, to 35560, the S&P 500 increased 7 points, or 0.15%, to 4589, and the Nasdaq Composite gained 29 points, or 0.21%, to 14346.

What drove markets

Stock markets were starting August in cautious mood, taking a breather after recording a five-month winning streak, the best such run in two years.

The S&P 500 index closed Monday at a 16-month high having gained 19.2% so far in 2023 as investors welcomed cooling U.S. inflation and hoped that the Federal Reserve can soon stop raising interest rates.

"This is not a major decline by any standard," Steve Sosnick, chief strategist at Interactive Brokers (IBKR), said in a phone interview. There's a range of reasons for the slight slippage, but it could just be an altitude check after the stock market skyrocket. "It's not unreasonable to see investor take some profits," he said.

Tuesday's slippage in stock prices comes after a mixed batch of earnings reports, including Uber Technologies UBER, Caterpillar CAT, JetBlue (JBLU), and Pfizer PFE.

With the S&P 500 index now only 4.6% away from a record high, investors are taking a break before earnings reports from Apple (AAPL) and Amazon.com (AMZN) later this week.

Investors will also be keenly eyeing jobs data during the week.

Labor Department data Tuesday showed job openings dropping slightly to 9.58 million in June, down from 9.61 million in May. The number of quitting workers nudged lower to 3.8 million, down from 4 million. The numbers indicate a still-tight job market.

"Economic data came in slightly softer than expected, though not enough to threaten the soft landing expectations," noted Louis Navellier, chairman and founder of Navellier & Associates.

Tuesday's JOLTS report showed a jobs market that's "still simmering" even if it's no longer boiling hot, said Nick Bunker, Indeed Hiring Lab's head of economic research.

"The pace of the current slowdown may be too gradual for many policymakers at the Federal Reserve, as job openings are only gradually declining. But workers have much to celebrate and still possess substantial leverage," he said in a note. "If layoffs continue to remain low, this tenacious and tight labor market can endure."

On Wednesday, there's the ADP private sector jobs report for July, then the weekly unemployment benefit claims on Thursday, and finally the July jobs report on Friday.

After such a run in equity markets -- including a Dow winning streak unseen in decades -- it's not a surprise for investors to start the new month with a pause and profit-taking, said Art Hogan, chief market strategist at B. Riley Wealth Management. In this context, "the dynamic is either wait-and-see or a pullback" while the real market catalysts are coming later this week, Hogan said. "It's easy to remain laser-focused on what's important."

Sosnick agreed that the two earnings reports and the job numbers are the big sparks ahead for traders. The numbers could paint a mixed picture and cancel out wider stock market effects, but if the Amazon and Apple numbers and job data "move in one direction with one another, up or down, you have a bit of a slingshot," he said.

In other U.S. economic data on Tuesday, the ISM manufacturing report for July rose to 46.4%, up from 46% While it's a tick higher, the read was still below expectations and any number under 50% signals contraction. The final S&P manufacturing PMI for July stayed at 49, the same as the initial read. Meanwhile, construction spending increased in June, though below analyst consensus. Spending on construction projects increased 0.5%, below the expectations for a 0.9% rise.

What's next for manufacturing is a matter of debate. JPMorgan researchers say the second half of the year could herald a recovery for the sector

-Frances Yue

Companies in focus

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08-01-23 1632ET

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