Viewers Flock to Streaming, Retail Sales Up, S&P 500 and Nasdaq Dip and Tesla Sparks Luxury Car Price Battle

Unexpected economic strength caused bond prices to decline and yields to rise. The yield on 10-year notes reached levels unseen since 2008.

• The market dips on strong retail sales, prompting bond yield rise and sector-specific declines.
• Shifting viewership habits influences broadcast TV as streaming captures larger share, reshaping revenue dynamics.
• Tesla's price-cut strategy ignites luxury car market competition, causing potential used car price shifts.

The trading session on Tuesday brought about a moderate downturn in the broad market indices, as the S&P 500 saw a decline of 1.2%, and the Nasdaq Composite experienced a minor drop of just over 1%. Among the noteworthy trends of the day, all eleven sectors comprising the S&P experienced declines, with financial stocks leading the retreat.

Although these losses were notable, it's important to keep in mind that the S&P has managed to maintain a 15% gain throughout the year, while the Nasdaq has surged by an impressive 30%.

The catalyst for Tuesday's market pullback was a robust retail sales report that outperformed expectations. Initial forecasts anticipated a 0.4% increase in retail sales for July compared to the previous month. However, the actual figure surpassed predictions by a considerable margin, recording a 0.7% surge.

The unexpected economic strength had an impact on the bond market, causing bond prices to decline and yields to rise. The yield on 10-year notes reached levels unseen since 2008 during early Tuesday trading, but subsequently settled at approximately 4.21%, marking the highest close since October of the prior year.

Turning to corporate earnings, retail giant Target (TGT) delivered sales data that exceeded projections. Nevertheless, the company fell short on revenue expectations and revised its full-year forecast downward. Target's management anticipates a mid-single-digit decline in same-store sales for the entire year. Despite the dimmer outlook, earnings managed to surpass estimates, leading to a premarket indication of a 7% uptick in Target's shares. However, Tuesday saw a sharp decline in the company's stock, leaving investors wondering if the early morning rally could be sustained. Meanwhile, TJX Cos. (TJX), a discount retailer, exceeded analyst revenue projections and enjoyed a 3.5% premarket surge in its stock price.

Shifting gears, a report from Nielsen unveiled a continuing change in viewership habits, with a noticeable decline in traditional broadcast television consumption as audiences increasingly turn to on-demand content. Presently, broadcast television accounts for just 20% of total viewing time, while cable TV claims a slightly higher share of just under 30%.

Remarkably, streaming content has surged to encompass nearly 39% of total viewing time. This evolving trend has intriguing implications for revenue generation in the streaming industry, as providers benefit from both subscriber growth and increased advertising opportunities. Disney's (DIS) recent decision to raise prices for its ad-free Disney+ and Hulu services by $3 per month reflects this dynamic shift, while retaining unchanged prices for their basic service.

In global economic news, China made headlines by reducing lending rates as part of its effort to manage and stabilize its moderating economic growth. On the home front, electric vehicle manufacturer Tesla (TSLA) faced a 2% dip in its share price following the announcement that the company plans to introduce more affordable versions of its Model X and S vehicles. This move may potentially trigger price competition within the luxury automobile market, leading to a possible adjustment in used car prices.

Looking ahead, market watchers have a few key events to keep their eyes on. The release of minutes from the latest Federal Open Market Committee meeting is anticipated, with curiosity about how the strong retail sales figures might influence the Fed's perspective at the upcoming annual Jackson Hole meeting of central banks. Additionally, the S&P 500's dip below its 50-day moving average is a point of interest, prompting scrutiny over whether the market can regain momentum and surpass this level or if further weakening is in store.

As always, adhering to your investment plans and long-term objectives remains a sound strategy in navigating these market fluctuations.

JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan

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