Stock Market Update

[BRIEFING.COM] The major averages hold midday losses, but once again they are showing resilience to selling efforts. The S&P 500 (-0.4%) has recovered roughly half of its opening loss while the Dow (-1.1%) is a bit closer to its low, making for a continuation of its recent underperformance.

The Friday session started with overall weakness in equities and a big jump in the price of oil after the night featured an Israeli strike on Iranian nuclear facilities. The negative development on the geopolitical front has weighed on sentiment, but the market has refused to buckle under pressure. Instead, the S&P 500 has spent the first half of the session in a steady rise off lows while oil has backed down from its overnight high just shy of $78/bbl, though it is still up $3.85, or 5.7%, at $71.89/bbl, set for its best pit close since late February.

The concerning development in the Middle East is taking place ahead of the weekend, so some apprehension is not surprising, but the market does not appear to be worried that a broader conflict will develop. President Trump said that Iran still has time to make a nuclear deal that would presumably deter Israel from further aggression.

Treasuries showed little early concern, but they have been sliding since the cash open, lifting the 10-yr yield (+8 bps to 4.43%) back above its 50-day moving average (4.37%), reflecting concerns about an inflationary boost resulting from a higher price of oil.

The retreat in Treasuries has not been stopped by today's lone economic data point—the preliminary University of Michigan Index of Consumer Sentiment for June—which showed a solid headline improvement (to 60.5 from 52.2; Briefing.com consensus 53.0), combined with a 150-basis point drop in year-ahead inflation expectations (to 5.1%).

Eight sectors continue holding losses at midday, but only four trade behind the broader market. That includes heavily-weighted financials (-1.5%) and technology (-0.8%).

The financials sector is feeling significant pressure from losses in payment processors like Visa (V 352.73, -18.67, -5.0%), PayPal (PYPL 71.39, -3.42, -4.6%), and Mastercard (MA 562.58, -26.70, -4.5%) amid concerns that they could lose some business if retail giants Amazon (AMZN 213.57, +0.33, +0.2%) and Walmart (WMT 94.58, -0.25, -0.3%) issue stablecoins, which could happen in the near future, according to The Wall Street Journal.

Top-weighted technology is being weighed down by profit taking in high-beta chipmakers that is causing the PHLX Semiconductor Index (-1.4%) to narrow this week's gain to 2.8%. This is masking an extension of yesterday's huge post-earnings rally in Oracle (ORCL 214.13, +14.27, +7.1%), which is now up 23.1% for the week with additional help from an upgrade at BMO Capital earlier today.

On the upside, energy (+1.1%) has spent the first half in the lead thanks to a higher price of oil. The energy sector has been the best performer of the week (+5.1%), padding its June gain to 7.3%.