Stocks closed sharply lower yesterday led by the Nasdaq which lost -3.64%, followed by the S&P which fell by -2.31%. Even the small-cap Russell 2000 was down, giving up -2.13%.

There was a lot more 'rotating' out of stocks yesterday than 'rotating' in.

Tuesday afternoon's disappointing earnings from Alphabet and Tesla weighed on stocks yesterday right from the start. Google actually reported positive EPS surprises on both earnings and sales, and posted double-digit growth rates as well. But concerns over expenses and margins weighed on shares. They were down -5.03% on the day. Tesla posted a negative EPS surprise (although, a positive sales surprise), and a negative EPS growth rate (although a positive sales growth). But it was their 4th quarter in a row where earnings lagged their counterpart from four quarters ago. Tesla shares were down by -12.3% for the day.

After the close yesterday, another carmaker, Ford, posted a negative EPS surprise of -26.6%. While they also reported a positive sales surprise of 7.97%, and a quarterly sales growth of 5.61%, that translated to a quarterly EPS growth rate of -34.7% vs. the same quarter last year. They were down -1.16% in the regular session before earnings, and fell another -12.0% in after-hours trade following earnings.

But there were some solid winners after the bell as well. IBM posted a positive EPS surprise of 12.5%, and a positive sales surprise of 1.23%. They were up more than 3% in after-hours trade. And ServiceNow posted a positive EPS surprise of 9.82%, and a positive sales surprise of 0.79%. They were up roughly 7% in after-hours trade.

We'll get more earnings today with another 288 companies on deck to report, which includes names like AbbVie, Union Pacific and Honeywell to name a few.

In other news, yesterday's MBA Mortgage Applications were down -2.2% w/w, with purchases down by -4.0%, and refi's up by 0.3%.

New Home Sales came in at 617,000 units (annualized) vs. last month's upwardly revised 621K (from 619K), and views for 640K.

The PMI Composite report improved to 55.0 vs. last month's 54.8. The Manufacturing Index slipped to 49.5 vs. last month's 51.6, while the Services Index rose to 56.0 vs. last month's 55.3.

And the Survey of Business Uncertainty showed U.S. firms expecting sales to grow by 3.90% over the next 12 months vs. last month's 3.77% pace, while unemployment grows by 4.43% vs. last month's 4.55%.

Today we'll get Durable Goods Orders, the first estimate for Q2 GDP, Weekly Jobless Claims, the International Trade in Goods report, Retail and Wholesale Inventories, and the Kansas City Fed Manufacturing Index.

But, as I mentioned yesterday, the report everybody is really waiting for is Friday's Personal Consumption Expenditures (PCE) index. That's the Fed's preferred inflation gauge. And it'll be the last inflation report we get before the Fed meets on July 30-31.

While nobody is expecting the Fed to cut rates next week, it will help inform their outlook on if they foresee a cut coming in September or further out like November or December.

In the meantime, we'll see if the markets can regain their footing today.

See you tomorrow,