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Markets Tread Cautiously, At or Near New Highs

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A cautious market — one which saw defensive plays like Real Estate, Healthcare and Staples go higher while Energy and Financials were lower — dominated this Hump Day trading activity. All indexes besides the small-cap Russell 2000 (which outperformed the majors at +0.58% on the day) took a dip in the final hour or so of trading. The S&P 500 was flat (+0.03%), the Nasdaq was +0.33% and the Dow came in its third-straight session lower: -0.14%.

As we pointed out in this column yesterday afternoon, however, the Dow is less on a losing streak than a settling period. In its three-days down, the blue-chip index is down -0.42% combined, not even half a percentage point. The S&P even notched a new intra-day record high before the afternoon slide. For its part, the Nasdaq put up its 33rd record closing high for 2021 so far.

ADP (ADP - Free Report) private-sector payrolls disappointed this morning, but investors seemed to shrug off this news when it came out before the opening bell. Markit Manufacturing PMI for August came in right in-line with expectations at 61.1, while ISM Manufacturing bounced back slightly from six-month lows the previous month to 59.9%, also for August. And July’s Construction Spending outperformed expectations to +0.3%, from a downwardly revised 0.0% for June.

Though Q2 earnings season is almost entirely in the rear view, Chewy (CHWY - Free Report) posted results that compared poorly with the Zacks consensus: -4 cents per share was worse than the -2 cents analysts had expected, on $2.16 billion in revenues which missed the $2.17 billion estimate. This has helped send shares of the Zacks Rank #2 (Buy)-rated specialty retailer down 11% in late trading.

Another problem analysts saw in the Q2 release was lower revenue guidance for both Q3 and the full fiscal year. Active customers had gained +21% in the quarter, with +13% growth in sales per active user. Yet the lowered guidance, which has swung the stock negative year to date, looks problematic for a company in what appears to be a growth industry. It’s the fourth bottom-line miss since the company’s 2019 IPO, but the first in the past four quarters.

We have a big day of economic prints tomorrow, including revisions to Q2 Productivity and Labor Costs, the U.S. Trade Balance, Factory Orders and, of course, weekly jobless claims on both the initial and continuing sides. We may uncover new post-Covid lows on jobless claims; on the longer-term side, we’re already riding a pretty decent winning streak. And this predates Friday’s nonfarm payroll reports, which is supposed to yield roughly double the monthly job gains the ADP reported.

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