Stock Market Update

[BRIEFING.COM] The major averages trade on their highs at midday after a steady extension of their opening gains. The Nasdaq (+1.4%) and Russell 2000 (+1.2%) are in the lead while the Dow (+1.1%) and S&P 500 (+1.1%) trade not far behind.

The strong start to the Tuesday session follows news that the U.S. brokered a ceasefire between Israel and Iran. To be fair, both sides violated the agreement shortly after it went into effect, but President Trump has called on both Israel and Iran to stop firing missiles at each other, leaving the market hopeful that hostilities will cease despite the rocky implementation of the agreement.

Ten sectors display midday gains with heavily-weighted groups like technology (+1.7%), financials (+1.5%), and communication services (+1.4%) leading the way while energy (-1.3%) has been kept in the red due to a continuation of yesterday's drop in the price of oil amid receding worries about an escalation in the Middle East. WTI crude is down 5.8% at $64.53/bbl today, and is now down nearly $15/bbl from its high on Sunday evening (78.40).

As for the leaders, technology has drawn significant support from chipmakers, helping the PHLX Semiconductor Index (+3.5%) pad its Q2 gain to 27.1% versus a 20.0% quarter-to-date gain in the broader tech sector and an 8.5% Q2 advance in the S&P 500. Intel (INTC 22.58, +1.39, +6.56%) and AMD (AMD 136.84, +7.26, +5.60%) have been at the forefront of the rally in chip stocks with AMD benefitting from news that it signed a strategic alliance agreement with HCLTech.

Financials have rallied behind investment firms and money center banks while insurers underperform. Payment processors are also among the outperformers with Mastercard (MA 554.10, +11.75, +2.17%) rising toward its 50-day moving average (559.60) after agreeing to deepen its partnership with Fiserv (FI 172.58, +2.04, +1.20%).

Elsewhere, the consumer discretionary sector (+1.0%) trades right behind the broader market with homebuilders having a decent showing even though KB Home (KBH 53.78, +0.46, +0.85%) beat Q2 expectations, but lowered its FY25 housing revenue, average selling price, and profit margin guidance. The stock has recovered its early loss while the iShares U.S. Home Construction ETF (ITB 93.26, +0.74, +0.81%) has reached a two-week high.

The market has also drawn some support from a rebound in Treasuries, which is sending yields to their lowest levels since early May with the 10-yr yield down two basis points at 4.30%.

Fed Chairman Powell is taking part in the first day of his two-day semiannual testimony on monetary policy, but today's appearance before the House Financial Services Committee did not produce any surprises. He repeated that the economy continues expanding at a solid pace, though the future path is uncertain. He also acknowledged that most policymakers feel that a rate cut will be appropriate later this year.

Reviewing today's economic data:

• The Conference Board's Consumer Confidence Index slumped to 93.0 in June (Briefing.com consensus 99.0) from an upwardly revised 98.4 (from 98.0) in May. In the same period a year ago, the index stood at 97.8.
  • The key takeaway from the report is that consumers were less positive about business conditions and job availability, which is a perception that could lead to reduced discretionary spending activity.
• The Current Account deficit widened to $450.2 bln in Q1 from a revised deficit of $312.0 bln (from -$303.9 bln).
• The FHFA Housing Price Index was down 0.4% in April (Briefing.com consensus 0.0%) after a revised unchanged reading (from -0.1%) in March.
• The S&P Case-Shiller Home Price Index was up 3.4% year-over-year in April (Briefing.com consensus 4.1%), down from 4.1% in March.