Daily market review

At the beginning of the day, the market appeared similar to recent sessions, with various factors limiting its growth while gains from large-cap stocks provided some support.

However, towards the end of the day, the major stock market indices closed near their lowest levels after both the S&P 500 and Dow Jones Industrial Average experienced a drop following the news that President Biden would be cutting his G-7 trip short. He decided to skip his Australia stop and return earlier than planned.

There was no information available about the debt ceiling meeting between President Biden and congressional leaders before the market closed. House Speaker McCarthy mentioned after the close that there is still a significant gap between the two sides. Senate Majority Leader Schumer stated that everyone agreed on the need for bipartisan cooperation and emphasized that a bipartisan bill in both chambers is the only way to avoid a default.

If it weren't for gains in the large-cap sector, the market would have experienced more significant losses by the end of the day. The Invesco S&P 500 Equal Weight ETF (RSP) dropped by 1.4%, while the Vanguard Mega Cap Growth ETF (MGK) showed a slight gain of 0.1%.

Among the major indices, the DJIA experienced the largest decline, partly due to Home Depot's disappointing performance. Home Depot reported lower fiscal Q1 sales, comp sales, and provided weak guidance for FY24. Other retailers such as Target, TJX, and Walmart are set to release their earnings reports later in the week.

In addition to these events, retail sales data for April was released in the morning. Although the report indicated a 0.4% increase in total retail sales, it's important to note that retail sales are not adjusted for inflation. After considering inflation, total retail sales remained relatively flat, suggesting weaker demand than what the headline number might suggest.

China also reported weaker-than-expected retail sales, industrial production, and fixed asset investment data for April, which contributed to concerns about the global growth rate.

These concerns led to a decline in commodity futures, with WTI crude oil futures falling by 0.6% and copper futures dropping by 2.2%.

Nine out of the eleven S&P 500 sectors closed with losses, with only the communication services and information technology sectors showing gains. The real estate and energy sectors experienced the largest declines.

Separately, the Federal Trade Commission (FTC) filed a lawsuit to block Amgen's acquisition of Horizon Therapeutics. This news had a significant negative impact on Amgen's stock and added to the headwinds faced by the overall equities market.

In the bond market, treasuries initially saw gains but ended the session with losses across the curve. The selling was likely driven by the belief that the morning's economic data was not weak enough for the Federal Reserve to consider cutting interest rates soon. The yields on the 2-year and 10-year notes increased in response.

Today's economic data included retail sales for April, which showed a 0.4% increase compared to the previous month. Retail sales excluding automobiles also increased by 0.4%. However, it's important to note that these figures do not account for inflation. The key takeaway from the report is that the growth in total retail sales was primarily due to price increases rather than increased demand.

Other economic data released today included industrial production for April, which saw a 0.5% increase, and the NAHB Housing Market Index for May, which came in at 50.

Looking ahead to Wednesday, market participants can expect to receive the weekly MBA Mortgage Index, April Housing Starts, Building Permits, and the weekly crude oil inventories report.