The information technology sector had a rough outing on Wednesday, yet that was somewhat to be expected. The sector was short-term overbought, and with Facebook (FB) and Twitter (TWTR) execs testifying before the Senate Intelligence Committee, there was a perfect excuse to take some money off the table.
Throw in some reported trade concerns, and, well, the selling activity was pretty much preordained.
The end result is that the S&P 500 information technology sector declined 1.5%, leaving it up "only" 17.8% for the year.
The weakness in the heavily-weighted information technology sector acted as a drag on the broader market, yet it didn't truly drag down everything else in its path. The S&P 500 declined just 0.3% as a rotation into the countercyclical sectors offset the weakness in the information technology sector to a large extent.
Separately, the S&P 500 industrials sector outperformed, increasing 0.6% in a move that made it clear that "trade concerns" were overplayed as a catalyst for yesterday's setback.
Nothing has been settled this morning on the trade front either, and yet the broader market is indicated to open on a flattish note. In other words, the trade uncertainty remains a hot topic of conversation, but it isn't necessarily fueling any selling fire in the stock market at this time.
The S&P futures are up three points and are trading roughly in-line with fair value. Meanwhile, the Nasdaq 100 futures are up eight points and the Dow Jones Industrial Average futures are up 41 points.
There is a bit of a wait-and-see mentality in the mix as NAFTA negotiations between the U.S. and Canada persist and the public comment period on a proposed tariff on $200 billion worth of Chinese imports expires at midnight.
There is a nagging sense that the Trump Administration will implement the tariff when that public comment period expires. China has already said it will retaliate against any such tariffs if they are imposed, so the mystery lies in how the market will react if this tariff tit-for-tat ratchets up as many think it is likely to do.
There are residual concerns, too, about the weakness in emerging markets that seem to be cooling off the stock market for the time being.
There hasn't been any corporate news of note to stir things up nor has this morning's economic data altered the course of things in any meaningful way.
The revised reading for second quarter (Q2) productivity was unchanged at 2.9%, as expected, which was the strongest increase since the first quarter of 2015. The uptick in Q2 productivity was the result of output increasing 5.0% and hours worked increasing 2.0%.
Q2 unit labor costs decreased 1.0% (Briefing.com consensus -0.9%), versus a previously reported 0.9% decrease, reflecting a 1.9% increase in hourly compensation and a 2.9% increase in productivity.
The key takeaway from the revised report is the same as the advance estimate: labor costs look to be in check, which will facilitate a gradual tightening path for the Federal Reserve.
The initial claims report, meanwhile, just keeps getting better. It showed a 10,000 drop in initial claims for the week ending September 1 to 203,000 (Briefing.com consensus 214,000), which is the lowest level of initial claims since December 6, 1969.
Continuing claims for the week ending August 25 decreased by 3,000 to 1.707 million. That left the four-week moving average at 1,718,500, which is the lowest level since December 8, 1973.
On a related note, the ADP Employment Change Report for August estimates 163,000 jobs were added to private-sector payrolls in August. That was shy of the Briefing.com consensus estimate of 186,000 and could temper job-growth expectations just a bit ahead of tomorrow's nonfarm payrolls report for August, which is expected to show 187,000 jobs added to nonfarm payrolls in August.
The Factory Orders Report for July (Briefing.com consensus -0.6%; Prior +0.7%) and the ISM Non-Manufacturing Index for August (Briefing.com consensus 56.5; Prior 55.7) will be released at 10:00 a.m. ET.