Stock Market Update

[BRIEFING.COM] The major averages are mixed at midday with the Dow (+0.7%) showing relative strength while the Nasdaq (-0.7%), leaving the S&P 500 (-0.2%) with a slim loss.

The mixed start to July follows a strong June that saw both the S&P 500 and Nasdaq finish the month at fresh records. Today, however, technology (-1.0%) and the communication services (-1.6%) sectors are seeing some profit taking after their recent show of strength. Meanwhile, eight of the remaining nine sectors hold gains with materials (+2.3%), health care (+1.6%), and energy (+1.0%) in the lead.

Chipmakers were at the forefront of the early weakness in technology after the reconciliation bill was stripped of an amendment that sought to bar state regulation of AI for the next ten years. The PHLX Semiconductor Index (-0.2%) was down nearly 2.0% in early trade, but it has recovered the bulk of that loss, making for a continuation of the group's impressive resilience. Top components NVIDIA (NVDA 154.44, -3.56, -2.25%) and Broadcom (AVGO 266.83, -8.82, -3.20%) remain among the laggards, but their weakness comes after both finished yesterday's session at fresh record highs.

Separately, Apple (AAPL 207.14, +1.97, +0.96%) is preventing the technology sector from showing a wider loss, seeing continued strength after yesterday's late report from Bloomberg that the company may seek outside help to improve Siri.

On the upside, today's leaders represent the weakest performing sectors from Q2, suggesting some bargain hunting at play. Dow component UnitedHealth (UNH 321.65, +9.68, +3.10%) is among the outperformers after plunging more than 40.0% in Q2. Similarly, the materials sector is enjoying broad-based strength from its 28 components after the sector gained just 2.6% in Q2.

In Washington, the Senate passed the reconciliation bill by one vote, setting the stage for a House vote tomorrow.

Treasuries have spent the first half of the session in a steady retreat from their opening highs after finishing June at their best levels since early May. The 10-yr yield is up three basis points at 4.26% after starting the day at 4.21%.

Reviewing today's economic data:

• The June ISM Manufacturing Index increased to 49.0% in June (Briefing.com consensus 48.8%) from 48.5% in May. The dividing line between expansion and contraction is 50.0%, so the June reading suggests that activity in the manufacturing sector contracted at a slightly slower pace than the prior month.
  • The key takeaway from the report is that it has more of a stagflation aura about it (the new orders index and employment index both contracted at a faster pace, while the prices index increased at a faster pace) that will make the Fed's policy deliberations more challenging and the market's view of the Fed's thinking more frustrating.
• The S&P Global U.S. Manufacturing PMI hit 52.9 in the final reading for June, up from 52.0 in May.
• Total construction spending decreased 0.3% month-over-month in May (Briefing.com consensus -0.2%) after an upwardly revised 0.2% decline (from -0.4%) in April. Total private construction was down 0.5% month-over-month, while total public construction was up 0.1% month-over-month. On a year-over-year basis, total construction spending was down 3.5%.
  • The key takeaway from the report is the same as the prior month: a downturn in new single-family construction, which is being pressured by higher costs, was the driver behind the weakness in residential spending.
• Job openings increased to 7.769 million in May from a revised 7.395 million (from 7.391 million) in April.