Stock Market Update

[BRIEFING.COM] The stock market had a tumultuous day as equities faced a sharp intraday reversal, which wiped out the early gains that followed NVIDIA's (NVDA 180.64, -5.88, -3.15%) stellar earnings report. 

Investors eagerly anticipated results from the world's largest company as the AI trade's momentum has stalled as of late. NVIDIA delivered on the hype, cruising past earnings expectations and delivering robust Q4 guidance. 

The S&P 500 (-1.6%), Nasdaq Composite (-2.2%), and DJIA (-0.8%) held gains wider than 1.0%, pushing them back above their 50-day moving averages, which had been violated earlier in the week. 

The PHLX Semiconductor Index (-4.8%) and Vanguard Mega Cap Growth ETF (-2.0%) were both up around 3.0% as NVIDIA's gain widened to nearly 5.0%. All eleven S&P 500 sectors traded higher as the broader market rallied with strong leadership from the market's largest names. 

Stocks hit a peak just before 11:00 ET, before a relatively sharp sell-off ensued. Some profit-taking was to be expected with such a large swing across the mega-caps, but the retreat broadened to nearly every corner of the market. 

The information technology sector (-2.7%) was hit the hardest, charting session lows through the close as the sector nearly inversed its early gain. Micron (MU 201.37, -24.55, -10.87%) and Advanced Micro Devices (AMD 206.02, -17.53, -7.84%) were among the names (along with NVIDIA) to push the PHLX Semiconductor Index 4.8% lower, while Oracle (ORCL 210.69, -14.84, -6.58%) and Palantir Technologies (PLTR 155.74, -9.68, -5.85%) also faced outsized losses. 

The industrials (-1.7%), consumer discretionary (-1.7%), materials (-1.6%), and communication services (-1.1%) sectors also faced considerable losses. 

Only the consumer staples sector (+1.1%) closed with a gain today. The sector was boosted from the open by Walmart (WMT 107.11, +6.50, +6.46%) after a solid beat-and-raise earnings report, while the defensive nature of the sector kept it largely resilient to the broader market pullback. 

Outside of the S&P 500, the Russell 2000 (-1.9%) and S&P Mid Cap 400 (-1.6%) faced losses similar to that of their larger-cap counterparts. 

Today's batch of economic data painted a mixed picture of the labor market. The September Employment Report saw a 119,000 increase in payrolls, but also included a downward revision to -4,000 for August. There was also an uptick in the unemployment rate to 4.4% from 4.3%, so the overall report was not as strong as the headline reading suggested. This will be the final jobs report ahead of the December FOMC meeting since the Bureau of Labor Statistics will not release the November report until December 16.

All told, today's data facilitated a modest increase in expectations for a December rate cut, though it still remains an unlikely occurrence. The CME FedWatch tool now assigns a 39.6% probability to a 25-basis point rate cut at the December FOMC meeting, up from 30.1% yesterday. 

Today's trade ultimately gives credence to concerns that the most recent run to record highs was too reliant on mega-cap leadership and the promise of an additional easing from the Fed. NVIDIA's inability to sustain gains after a blowout earnings report shows that the market's sentiment around the AI trade is still skewed to the downside, keeping the major averages from holding above the critical 50-day moving average level. 

U.S. Treasuries climbed on Thursday, recovering their slim midweek losses. The 2-year note yield settled down four basis points to 3.56%, and the 10-year note yield settled down three basis points to 4.11%. 

• Nasdaq Composite: +14.3% YTD
• S&P 500: +11.2% YTD
• DJIA: +7.5% YTD
• Russell 2000: +3.4% YTD
• S&P Mid Cap 400: -0.4% YTD

Reviewing today's data:

• The September employment report, which is certainly a lagging indicator this time, suggested the labor market was not falling apart in September. In fact, nonfarm payroll gains accelerated to 119,000 after declining by 4,000 in August.
  • This wasn't an abjectly strong report, nor was it an abjectly weak report. We wouldn't call it "just right" either, not with the uptick in the unemployment rate and the stalling out of average weekly hours worked, but the key takeaway is that this report wouldn't be enough to convince the more hawkish-minded Fed officials to cut rates in December.
• Initial jobless claims for the week ending November 15 decreased by 8,000 to a lowly 220,000. Continuing jobless claims for the week ending November 8 increased by 28,000 to a not-so-lowly 1.974 million, which is the highest since November 6, 2021.
  • The key takeaway from the report is that it corroborates the low firing, low hiring narrative hanging over the labor market.
• Existing home sales increased 1.2% month-over-month in October to a seasonally adjusted annual rate of 4.10 million (Briefing.com consensus 4.08 million) from a downwardly revised 4.05 million (from 4.06 million) in September. Sales were up 1.7% on a year-over-year basis.
  • The key takeaway from the report is that home sales in October were aided by lower mortgage rates, yet limited inventory in some regions, combined with high prices in others, got in the way of stronger selling activity.
• November Philadelphia Fed Index -1.7 vs. 2.0 Briefing.com consensus; prior -12.8