Stock Market Update

[BRIEFING.COM] The S&P 500 (+0.4%) finished Thursday with a modest gain, slightly outpacing the Nasdaq (+0.2%) and the Dow (+0.2%) while small caps lagged, sending the Russell 2000 lower by 0.4%.

The modestly higher finish in the large cap indices was a reflection of continued resilience to selling efforts, as participants remained fearful of missing out on further gains after a big rally off the April low.

Equities saw some early pressure stemming from President Trump's toughening stance on trade and some renewed geopolitical concerns surrounding the Middle East, but that was offset by rate-cut friendly economic data.

President Trump said that letters with trade term offers will be sent to different countries. These offers will not leave much room for negotiation since he added that they will come with a "take it or leave it" caveat.

There was also some focus on the growing tensions in the Middle East after yesterday's report that U.S. Embassy staff in Baghdad received authorization to leave their post. President Trump confirmed the report last evening, and today, ABC News reported that Israel is considering military action against Iran with logistical support from the U.S.

Economic data released today included a cooler-than-expected PPI report for May (0.1%; Briefing.com consensus 0.2%) and a jobless claims report, which showed a big jump in Continuing Claims (+54,000 to 1.956 million) to levels not seen since late 2021.

Today's data strengthened the market's rate cut expectations for September, and it played a part in the market's opening rise off lows. Eight sectors finished the day in positive territory with top-weighted technology (+1.0%) finishing only behind the lightly-weighted utilities sector (+1.3%).

The technology sector received daylong support from fifth-largest component Oracle (ORCL 199.85, +23.47, +13.3%), which soared to a fresh record after the company beat Q3 expectations and issued in-line guidance for Q4. Chipmakers were among the outperformers in early trade, but the PHLX Semiconductor Index (+0.3%) gave back the bulk of its early gain, finishing behind the broader market.

On the downside, the communication services sector (-0.6%) was the worst performer, though it is still one this month's leaders, having climbed 3.2% since the end of May versus a 2.3% month-to-date gain in the S&P 500. Industrials (-0.2%) also lagged with Boeing (BA 203.75, -10.25, -4.8%) weighing the group down after an Air India 787 crashed shortly after take-off in Ahmedabad.

Treasuries ended with solid gains, as the 10-yr note and shorter tenors essentially finished where they started while the long bond outperformed with help from today's strong $22 bln 30-yr bond sale. The 10-yr yield fell six basis points to 4.36%, ending just below its 50-day moving average (4.369%).

Reviewing today's economic data:

• The Producer Price Index for final demand increased 0.1% month-over-month in May (Briefing.com consensus 0.2%) after decreasing a revised 0.2% (from -0.5%) in April. The Producer Price Index for final demand, less foods and energy, also increased 0.1% month-over-month (Briefing.com consensus 0.3%), while the April reading was revised up to -0.2% from -0.4%. On a year-over-year basis, the index for final demand was up 2.6%, versus an upwardly revised 2.5% in April (from 2.4%), while the index for final demand, less foods and energy, was up 3.0%, versus an upwardly revised 3.2% (from 3.1%) in April.
  • The key takeaway from the report is that the positive impact of a cooler-than-expected reading is largely being offset by upward revisions to readings from April. That said, the year-over-year Core PPI rate decelerated to 3.0% from 3.2%, which is a positive development.
• Initial jobless claims for the week ending June 7 hit 248,000 (Briefing.com consensus 250,000), unchanged from the prior week's upwardly revised level (from 247,000). Continuing jobless claims for the week ending May 31 increased by 54,000 to 1.956 million from last week's downwardly revised 1.902 million (from 1.904 million).
  • The key takeaway from the report is that continuing claims reached a level not seen since late 2021, which will invite some questions about the strength of the labor market since laid-off workers are having an increasingly difficult time finding new jobs quickly.

Tomorrow's data will be limited to the 10:00 ET release of the preliminary reading of the University of Michigan's Consumer Sentiment Index for June (Briefing.com consensus 53.0; prior 52.2).

• S&P 500 +2.8% YTD
• Nasdaq Composite +1.8% YTD
• Dow Jones Industrial Average +1.0% YTD
• S&P Midcap 400 -2.2% YTD
• Russell 2000 -4.1% YTD