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“When things go wrong, don’t go with them.” – Elvis Presley

Morning stock market summary

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It’s been a tentative morning in markets following yesterday’s relatively large declines. Building Permits and Housing Starts were just released and while Permits were slightly weaker than expected, Starts were slightly better than expected although June’s reading was revised lower. The only other reports on the calendar for the day are Capacity Utilization and Industrial Production at 9:15 Eastern. Also don’t forget about the release of the Fed Minutes at 2PM.

2023 started off weak for the Industrials sector as it underperformed the broader market by a wide margin in the first five months of the year.  As of the end of May, the sector was down fractionally YTD even as the S&P 500 was up over 9%.  The chart below showing the relative strength of the sector versus the S&P 500 clearly illustrates this trend, but just as the sector underperformed in the first five months of the year, it has seen a rebound since then as concerns over a hard landing in the US economy shifted more to a soft or no-landing scenario. As the overall market has come under pressure in August, though, the Industrials sectors hasn’t been immune to the selling, and yesterday’s decline of 1.27% for the sector was the largest one-day decline since 5/31 when the sector’s relative strength bottomed for the year.

Unlike the S&P 500 which closed below its 50-day moving average yesterday, the Industrials sector managed to hold above that level for now and looking at a longer-term chart for the sector, it’s interesting to note that the support of the 50-DMA also happens to coincide with the sector’s highs from late 2021 and early 2022.  Theoretically, these prior highs should act as support, but only time will tell.

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