Stock Market Update

[BRIEFING.COM] The S&P 500 (+1.0%), Nasdaq Composite (+1.7%), and DJIA (+0.4%) sit a touch off of session highs after a morning of broad gains that followed a better-than-expected November CPI Report and a blowout earnings report from Micron (MU 251.22, +25.70, +11.39%). 

The delayed November CPI report saw CPI and Core CPI rise 0.2% from September to November (Briefing.com consensus 0.3% for both figures), with a lack of October data due to the shutdown. Perhaps more notably, on a year-over-year basis, total CPI increased 2.7% versus a prior 3.0%, and core CPI was up 2.6% versus a prior 3.0%, which could bolster the case for additional policy easing next year. 

The data release gave futures another boost before the open, though Micron's (MU 251.22, +25.70, +11.39%) earnings release after the close yesterday already had many of the market's weightiest names moving in the right direction. The company shattered estimates for both revenue and earnings while providing a Q2 outlook that far exceeded market expectations.

The report reinvigorated an AI trade that has seen some considerable weakness in recent sessions, including yesterday's action. The PHLX Semiconductor Index is up 2.7%, and the broader information technology sector is up 1.4%. 

Several other sectors with mega-cap tech components also reap the benefits of today's rebound. The consumer discretionary sector (+2.1%) holds the widest gain today, supported by strong leadership from Tesla (TSLA 489.10, +21.84, +4.67%) and Amazon (AMZN 226.23, +4.96, +2.24%). The Vanguard Mega Cap Growth ETF is up 1.5%, after retreating 1.9% yesterday. 

Elsewhere in the consumer discretionary sector, lululemon athletica (LULU 221.45, +13.58, +6.53%) holds one of the widest non-Micron gains today after The Wall Street Journal reported that Elliot Investment Management has built a position in the company exceeding $1 billion.

The communication services sector (+1.7%) is another outperformer among the seven S&P 500 sectors that trade higher. 

The market saw a touch of shakiness just after midday that saw as many as five S&P 500 sectors move beneath their flatlines, with the DJIA briefly entering negative territory. 

Stocks have largely recovered, with only the energy sector (-1.2%) holding a loss wider than 0.5%. The S&P 500 currently trades above its 50-day moving average (6,765.56), which it closed beneath yesterday. 

The smaller-cap Russell 2000 (+1.0%) and S&P Mid Cap 400 (+0.7) also hold decent gains similar to that of their larger-cap counterparts. 

Reviewing today's data:

• Total CPI for the two-month period from September to November was up 0.2% (Briefing.com consensus: 0.3%), while core CPI, which excludes food and energy, was also up 0.2% for the two-month period (Briefing.com consensus: 0.3%). The October data were not available due to the government shutdown. On a year-over-year basis, total CPI increased 2.7% versus a prior 3.0%, and core CPI was up 2.6% versus a prior 3.0%.
  • The key takeaway from the report is twofold: first, it is a messy report because of the lack of October data, but secondly and more to the point today, the disinflation in the year-over-year readings is a welcome sight for policymakers and market participants.
• Initial jobless claims for the week ending December 13 decreased by 13,000 to 224,000 (Briefing.com consensus: 229,000). Continuing jobless claims for the week ending December 6 increased by 67,000 to 1.897 million.
  • The key takeaway from the report is its low firing-low hiring dynamic, evidenced by the decrease in initial claims and the increase in continuing claims. That is a delicate balance that helps validate the Fed's willingness to walk the line with a rate cut at its December meeting, particularly when paired with the disinflation seen in the November CPI report.
• The Philadelphia Fed Index dropped to -10.2 in December (Briefing.com consensus: 2.9) from -1.7 in November. The headline reading, though, was also accompanied by a welcome 13-point drop in the prices paid index to 43.6, which is the lowest reading since June.