Stock Market Factors - Here's What's What Today

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Includes: DIA, IWM, QQQ, SPY, USO, UUP, VOO, VTI, VXX
by: Markos Kaminis

Summary

Economic data was mostly positive today, with strong reports on housing and manufacturing coming against still solid data on the Midwest.

A geopolitical overhang was a drag on risk assets today, with a slew of concerning news reaching the wire.

More D.C. changes were weighing toward the close of trading.

Still, if economic data improves as I expect, equities should march higher.

Stocks meandered their way through the day, wary of D.C. chaos, but aware of a decent economic situation. Geopolitical overhangs are also keeping capital at bay. However, if the data deserves it, stocks will mark new highs sure enough soon enough.

In my week ahead report, I stated that economic data could prove America's economy is picking up steam this week, if last week's GDP report did not do it for you. As I jotted away here at 3:30 PM EDT, the SPDR S&P 500 (NYSE: SPY) was about unchanged. Here's why:

The data was good, with four reports reaching the wire. The Chicago Purchasing Managers' Index (PMI) slipped to 58.9 for July, down from 65.7 in June. Economists' expected more, with the consensus expectation at 61.0. Still, all five barometer components decreased, including new orders by 11.6 to 60.3. Let's note that a mark above 50.0 illustrates economic expansion, and that these levels still all exceeded their 12-month averages. June was exceptional, so a step back is not regrettable.

Pending Home Sales was reported sharply higher in June, up 1.5% to a level of 110.2. That exceeded expectations for 0.9% increase and compared against June's index level of 108.6. Pending Home Sales had slipped three months in a row. This data indicates that existing home sales should post improvement through the summer, marking a good start to the second half of the year.

The Dallas Fed's Manufacturing Survey General Activity Index gained to 16.8, up from 15.0 in June. Economists expected the index to mark 13.8. New orders reached 16.1; production marked 22.8; and shipments sat at 11.6. Employment remained strong, with significant net hiring continuing and the workweek increasing. Importantly, some sign of healthy price increases were seen in wages and benefits, and somewhat in increased selling prices. Farm Prices were also reported today, decreased though by 0.1%. Farm prices were still up 4.6% on the year.

The Vice Chair of the Federal Reserve may have just impacted his chances of becoming Fed Chair. Stanley Fischer said dysfunction in D.C. may be impeding economic expansion. Two favorite words of the President's are coming to my mind now.

And now we come to the reason why stocks have not gained in value today, though the SPDR Dow Jones (NYSE: DIA) increase of 0.4% indicates industrials are continuing their outsized performance of late. The Nasdaq-100 (Nasdaq: QQQ) was lower by about 0.3% as sector rotation appears to be occurring from high flying tech into cyclicals.

Russia is matching new sanctions by the U.S. Congress with some of its own, demanding two-thirds of the U.S. government staff their leave the country. North Korea launched another ICBM that some experts claim indicates the radical power can now reach Chicago. Kurds are claiming independence from Iraq, and Venezuela is on fire after a vote to give the nation's despot leader more power. The U.S. is promising sanctions on Venezuela that may include an embargo on the nation's oil exports. Oil (NYSE: USO) is up about 1.0%.

Oh, and in late afternoon news, it appears the fresh Chief of Communications, Anthony Scaramucci, is out after a 10 day tenure, and leaving on the first day of the new Chief of Staff, probably by no coincidence.

It's hard for stocks to appreciate under conditions like these, especially during a summer season with many Wall Streeters taking time off. Still, if the economic data gets good enough this week - see our Week Ahead coverage - stocks should reach for higher ground. For more of my regular work on the markets, readers are welcomed to follow the column here at Seeking Alpha.

Disclosure: I am/we are long USO.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: My long position is via options.