Stock Market Update

[BRIEFING.COM] The stock market was invigorated by impressive earnings reports from Meta Platforms (META 773.44, +78.23, +11.3%) and Microsoft (MSFT 533.50, +20.26, +4.0%) and quickly pushed the S&P 500 (-0.4%) and Nasdaq Composite (flat) to new record intraday highs, but the broader market struggled to keep pace, with broad-based losses keeping the indices from record closing highs.

At its peak, the S&P 500 set a new record of 6,427.02. The Nasdaq Composite set a new record around the same time at 21,457.48

The communications services sector (+2.1%) was able to retain the bulk of its early gains thanks to Meta's stellar Q2 earnings report, which bolstered its stock to new record highs, as the company's robust beat-and-raise performance underscored its dominance in digital advertising and AI-driven innovation. 

Microsoft also soared to new record levels after posting its largest EPS beat in the last seven quarters, with the early gains pushing the company past $4 trillion in market capitalization. The company's Azure AI services grew a notable 39%.

Early excitement in tech was further compounded with the IPO of the collaborative design software company Figma (FIG 115.50, +82.50, +250.0%). The 36.9 million share IPO was priced far above expectations ($33 vs. $25-$28 projected range), opened for trading with a staggering 158% gain at $85, and then rocketed as high as $116 before shares were immediately halted.

Despite all the buzz in the tech world, semiconductor stocks markedly underperformed out of the gate, hinting at volatility that would ultimately steer the major averages from their hot start. 

Disappointing earnings and guidance from Qualcomm (QCOM 146.80, -12.26, -7.7%), Arm Holdings plc (ARM 141.38, -21.95, -13.4%), and Lam Research (LRCX 94.85, -4.24, -4.3%), along with weaker-than-expected results from Samsung Electronics, weighed heavily on chipmakers. The Philadelphia Semiconductor Index finished with a loss of 3.1%, narrowing its month-to-date gains to just 1.1%.

Though the technology sector was up as much as 1.3% in the early going, it closed with a loss of 0.3%. The communication services (+2.1%) and utilities (+0.6%) sectors were the only S&P 500 sectors to close with a gain, though eight sectors traded in positive territory this morning.

The health care sector (-2.8%) was the hardest hit, as pharmaceutical stocks faced pressure after President Trump declared that he sent letters to 17 pharmaceutical CEOs demanding an extension of most favored drug pricing by September 29, raising concerns about their earnings prospects.

The real estate (-1.7%) and materials (-1.0%) sectors round out the bottom three S&P 500 sectors.

While a trade deal with South Korea featuring a 15% tariff rate was struck, and Mexico was granted a 90-day extension on the 25% tariff rate, there were reminders today that tariffs for other countries are reverting to the onerous tariff rates announced on April 2.

Additionally, today's economic reports largely fell in line with the Fed's prevailing view that it can stand by to watch more incoming data before cutting rates since the economy remains on a growth track at the same time inflation continues to stick at higher levels amid higher tariff rates.

The retreat on "good news" today triggered selling activity that could be indicative of a looming consolidation in an overbought market. The CBOE Volatility Index was up 8.6% at 16.82.

U.S. Treasuries finished July on a subdued note despite a morning barrage of economic data. The quiet session capped a month that saw losses across the complex with relative weakness up front amid receding bets for near-term easing from the Fed. The 2-year note yield settled up one basis point at 3.95% (+23 basis points in July), and the 10-year note yield settled down two basis points at 4.36% (+13 basis points in July).

• Nasdaq Composite: +9.3% YTD
• S&P 500: +7.8% YTD
• DJIA: +3.7% YTD
• S&P 400: +1.0% YTD
• Russell 2000: -0.8% YTD

Reviewing today's data:

• June Personal Income 0.3% (Briefing.com consensus 0.3%); Prior -0.4%, June Personal Spending 0.3% (Briefing.com consensus 0.4%); Prior was revised to 0.0% from -0.1%, June PCE Prices 0.3% (Briefing.com consensus 0.3%); Prior was revised to 0.2% from 0.1%, June PCE Prices - Core 0.3% (Briefing.com consensus 0.3%); Prior 0.2%
  • The key takeaway from the report is that real personal spending was up a modest 0.1% in June. That isn't much, although it does show that consumers continue to have the capacity to spend in the face of higher prices.
• Weekly Initial Claims 218K (Briefing.com consensus 220K); Prior 217K, Weekly Continuing Claims 1.946 mln; Prior was revised to 1.946 mln from 1.955 mln
  • The key takeaway from the report is the recognition that employers still remain reluctant to lay off employees, but employees that do get laid off are facing a tougher time finding a new job.
• Q2 Employment Cost Index 0.9% (Briefing.com consensus 0.8%); Prior 0.9%
  • The key takeaway from the report is that compensation costs have moderated, which could serve to lower some of the inflation temperature at the Fed.
• July Chicago PMI 47.1 (Briefing.com consensus 42.1); Prior 40.4