Stock Market Update

[BRIEFING.COM] The stock market got off to a good start today, ran into some selling pressure mid-morning, but then regrouped in the afternoon and closed the week on a winning note.

It did so with an eye on the three-day weekend ahead, which detracted some from today's involvement but not necessarily the bullish bias. The Dow Jones Industrial Average went out at its high for the day, setting a new record in the process, with a burst of buying interest in the last ten minutes of trading. That burst also sent the S&P 500 to its highs for the session and to the doorstep of a new closing high of its own.

The market was feeding off positive responses to earnings reports from Dell (DELL 115.54, +4.80, +4.3%), Marvell (MRVL 76.24, +6.40, +9.2%), and MongoDB (MDB 290.79, +45.07, +18.3%), the outperformance of Amazon (AMZN 178.50, +6.38, +3.7%), Tesla (TSLA 214.11, +7.83, +3.8%), and NVIDIA (NVDA 119.37, +1.78, +1.5%), and economic news that left the market oriented toward a soft landing for the economy and a rate cut at the September FOMC meeting.

The key piece of economic data was the Personal Income and Spending Report for July, which showed personal income up 0.3%, personal spending up 0.5%, and the PCE Price Index and core-PCE Price Index both up 0.2%, which kept their year-over-year changes steady at 2.5% and 2.6%, respectively.

This good news tempered the outlook for a 50-basis points rate cut at the September FOMC meeting, but not by much as participants kept their mind on next Friday's release of the August employment report, which many expect to be the key piece of data that will drive the Fed's policy decision.

A 25-basis points rate cut is fully priced in, according to the CME FedWatch Tool, but the probability of a 50-basis points rate cut was trimmed to 30.5% today from 34.0% yesterday.

The Treasury market acted in kind. The 2-yr note yield, which is sensitive to changes in the fed funds rate, increased four basis points to 3.93%. The 10-yr note yield also jumped four basis points to 3.91%.

Those moves did not impede the stock market. All 11 S&P 500 sectors finished higher with gains ranging from 0.3% (energy) to 1.9% (consumer discretionary). The energy sector for its part spent nearly the entirety of today's session in red figures, dealing with reports that OPEC+ is likely to raise output in October, but was pulled out of that losing position with the late buying interest.  

Helped by the rebound in NVIDIA and Marvell's earnings report, the Philadelphia Semiconductor Index ("SOX") surged 2.6%. Despite that gain, the SOX still finished the week down 1.3%. Similarly, the Nasdaq Composite jumped 1.1% today, but ended the week 0.9% lower. The S&P 500 eked out a 0.2% gain for the week while the Russell 2000 suffered a fractional loss. The Dow Jones Industrial Average led them all with a 0.9% gain.

• S&P 500: +18.4% YTD
• Nasdaq Composite: +18.0% YTD
• S&P Midcap 400: +11.1% YTD
• Dow Jones Industrial Average: +10.2% YTD
• Russell 2000: +9.4% YTD

Reviewing today's economic data:

• Personal income was up 0.3% month-over-month in July (Briefing.com consensus 0.2%) following an unrevised 0.2% increase in June. Personal spending jumped a healthy 0.5% (Briefing.com consensus 0.5%) following a 0.3% increase in June. The PCE Price Index was up 0.2% (Briefing.com consensus 0.2%), leaving it up 2.5% year-over-year, unchanged from June. The core-PCE Price Index was up 0.2% (Briefing.com consensus 0.2%), leaving it up 2.6% year-over-year, unchanged from June.
  • The key takeaway from this report is the recognition that it meshes nicely with the market's prevailing view that the U.S. economy will be able to avoid a hard landing and that the Fed will cut its policy rate because inflation is moving back toward the 2% goal.
• The August Chicago PMI checked in at 46.1 versus 45.3 in July. A number below 50.0 is indicative of a contraction in activity; however, the improvement versus July suggests the pace of contraction slowed in August.
• The final reading for the August University of Michigan Index of Consumer Sentiment crossed at 67.9 (Briefing.com consensus 67.8) versus the preliminary reading of 67.8.
  • The key takeaway from the report is that consumers' short-run and long-run economic outlook improved.