Stock Market Update

[BRIEFING.COM] The major indices started this quarterly options expiration day on a positive note, bolstered by President Trump's remark that he will decide on a final course of action with respect to Iran over the next two weeks and Fed Governor Waller's (FOMC voter) belief that he doesn't think there will be tariff inflation and that the Fed could cut rates as early as July.

Mr. Waller was careful to indicate that this is only his view and that he isn't speaking for the Fed. Fittingly, Richmond Fed President Barkin (non-FOMC voter) came out later in the day and said he sees no rush to cut rates amid the tariff uncertainty and resilient economy. The fed funds futures market continued to see it Mr. Barkin's way. A day ago there was a 12.5% probability of a 25 basis point cut at the July FOMC meeting, and notwithstanding Mr. Waller's more hopeful view, the probability of a 25 basis point cut rose to only 14.5% today, according to the CME FedWatch Tool.

The stock market was unable to sustain the positive demeanor seen at today's open, as many stocks succumbed to some profit-taking interest. Kroger (KR 71.97, +6.45, +9.84%), CarMax (KMX 68.57, +4.24, +6.59%), and Darden Restaurants (DRI 225.78, +3.03, +1.36%) were not among them, as they all responded positively in the wake of reporting earnings results.

Notably, the mega-cap cohort and the semiconductor stocks underperformed today, evidenced by a 0.4% decline in the Vanguard Mega Cap Growth Index Fund (MGK 348.17, -1.94, -0.55%) and a 0.8% decline in the Philadelphia Semiconductor Index.

Semiconductor stocks were undercut by a Wall Street Journal report that the Trump administration is planning to revoke waivers that allow chip companies to use American chipmaking technology in China.

The weakness in the semiconductor stocks weighed on the information technology sector (-0.3%), but it was the communication services sector (-1.9%) that took the biggest hit today as its biggest components traded lower.

Alphabet (GOOG 167.73, -6.25, -3.59%) got clipped in part by the news that the Advocate General in the Google Android case in the EU Court proposed that the Court of Justice dismiss Google's appeal and confirm the new fine of EUR4.124 billion set by the General Court. Meta Platforms (META 682.35, -13.42, -1.93%) was jostled by reports that it had previously considered buying Perplexity and that it had attempted to acquire Safe Superintelligence.

The energy sector (+1.1%) was the strongest performer today, as oil prices moved higher in some anxious trading going into the weekend. WTI crude futures rose $0.38, or 0.6%, to $73.88/barrel.

In related news, AP reported that today's meeting between European ministers for foreign affairs and their counterpart in Iran did not produce any breakthrough but that the European representatives expressed a willingness to meet again in the future.

The Treasury market, for its part, had a bit of a roller-coaster trade. The 10-yr note yield moved as high as 4.44% from an overnight low of 4.36% but settled the session at 4.38%, down two basis points from Wednesday's settlement. The 2-yr note yield went as high as 3.96% but settled the session down three basis points at 3.91%.

Breadth figures reflected an otherwise mixed disposition in today's trade, with neither buyers nor sellers showing a great deal of conviction. Decliners led advancers by a slim margin at the NYSE, while decliners outpaced advancers by a roughly 13-to-9 margin at the Nasdaq.

• S&P 500: +1.5% YTD
• Nasdaq: +0.7% YTD
• DJIA: -0.8% YTD
• S&P 400: -3.1% YTD
• Russell 2000: -5.4% YTD

Reviewing today's economic data:

• The Philadelphia Fed Index hit -4.0 in June (Briefing.com consensus 0.3) unchanged from May.

• The Conference Board's Leading Economic Index was down 0.1% in May (Briefing.com consensus -0.1%) after falling a revised 1.4% (from -1.0%) in April.