Stock Market Update

[BRIEFING.COM] It was a difficult start for the stock market today, which had made a huge move off the April 7 low. The primary headline catalysts for the weak open included:

• Stagflation worries, which were fueled by the 0.3% decline in Q1 GDP, the 3.7% increase in the GDP Price Deflator, and the modest 62,000 increase in private-sector payrolls in April, according to the ADP Employment Change Report.
• A fiscal Q3 (March) earnings warning from Super Micro Computer (SMCI 30.47, -5.53, -15.4%) that was attributed to some delayed customer platform decisions.
• Consumer spending concerns that followed disappointing earnings reports from Starbucks (SBUX 78.99, -5.86, -6.9%) and Norwegian Cruise Line Holdings (NCLH 15.91, -1.48, -8.5%).

The S&P 500, riding a six-session winning streak, dropped as much as 2.3%, and the Nasdaq Composite was down 2.9%. Both made notable recoveries, though, as did the other indices, following the 10:00 a.m. ET release of the March Personal Income and Spending Report, which featured unchanged readings for both the PCE Price Index and core-PCE Price Index on a month-over-month basis. 

Most stocks recovered nicely from session lows, yet there isn't much absolute strength in today's session, outside of individual stock moves. The only S&P 500 sectors on positive ground are the defensive-oriented consumer staples (+0.6%) and health care (+0.2%) sectors.

The communication services (-1.4%) and information technology (-1.0%) sectors are weak links, as they wait for earnings reports after the close from Meta Platforms (META 538.51, -15.93, -2.9%) and Microsoft (MSFT 390.02, -4.03, -1.0%), respectively, while also dealing with some growth stock malaise in the wake of Super Micro's warning.

Separately, most Dow components remain lower for the day, including Caterpillar (CAT 303.84, -3.56, -1.2%), which reported its quarterly results ahead of today's open. Fellow component Visa (V 342.67, +1.15, +0.3%) is in the minority of stocks trading higher after topping earnings expectations and announcing a $30 billion share buyback program.

Decliners lead advancers by a nearly 3-to-1 margin at the NYSE and by a better than 2-to-1 margin at the Nasdaq.

Reviewing today's economic data:

• Mortgage Applications Index -4.2% wk/wk, with refinance applications down 4% and purchase applications down 4%.
• The April ADP Employment Change Report showed an estimated 62,000 jobs were added to private-sector payrolls (Briefing.com consensus 128,000), and the pay for job-stayers rose 4.5% year-over-year, which was a slight deceleration from March.
• The Q1 Employment Cost Index was up 0.9%, as expected, for the three-month period ending in March 2025, following a 0.9% increase for the three-month period ending in December 2024. Wages and salaries increased 0.8%, versus 1.0% for the prior quarter, and benefit costs jumped 1.2%, versus 0.8% for the prior quarter.
  • The key takeaway from the report is that employment costs have softened year-over-year, with compensation costs increasing 3.6% for the 12 months ending in March 2025, versus 4.2% for the 12 months ending in March 2024.
• The Adv. Q1 GDP report showed a 0.3% decline in real GDP (Briefing.com consensus 0.4%), with net exports subtracting 4.83 percentage points from growth, following a 2.4% increase in Q4. The GDP Price Deflator jumped 3.7% (Briefing.com consensus 3.1%) following a 2.3% increase in Q4.
  • The key takeaway from the report is that there was obvious frontrunning of the tariff measures, which showed up in a 41.3% increase in imports. Separately, consumer spending growth was decent at 1.8%, yet that was a marked slowdown from the 4.0% growth seen in Q4.
• April Chicago PMI 44.6 vs. 46.0 Briefing.com consensus; prior 47.6.
• Personal income increased 0.5% month-over-month in March (Briefing.com consensus 0.4%) after increasing a revised 0.7% (from 0.8%) in February. Personal spending rose 0.7% month-over-month (Briefing.com consensus 0.4%) after increasing a revised 0.5% (from 0.4%) in February. The PCE Price Index was unchanged month-over-month (Briefing.com consensus 0.0%), which left it up 2.3% year-over-year versus a revised 2.7% (from 2.5%) in February. The core-PCE Price Index was also unchanged month-over-month (Briefing.com consensus 0.1%), which left it up 2.6% year-over-year versus a revised 3.0% (from 2.8%) in February.
  • The key takeaway from the report is that it showed an acceleration in spending as consumers prepared for the implementation of tariffs. The PCE Price Index decelerated to 2.3% year-over-year from 2.7% while the core PCE Price Index decelerated to 2.6% year-over-year from 3.0%, making for a welcome sight.
• March Pending Home Sales up 6.1% (Briefing.com consensus -0.2%); prior revised to 2.1% from 2.0%