Stock Market Update

[BRIEFING.COM] While the stock market's opening gains captured fresh record highs for the S&P 500 (+0.1%) and Nasdaq Composite (-0.1%), some profit-taking has the indices defending their baselines, while the DJIA (+0.8%) outperforms.

The market remains buoyed by growing confidence in upcoming rate cuts, with expectations firming further this morning.

The CME FedWatch Tool now assigns a 99.9% probability to a 25-basis-point cut in September—up from 93.9% yesterday and 60.4% a month ago. The latest uptick follows Treasury Secretary Bessent's comments on Fox Business last night advocating for a 50-basis-point cut, a stance he reiterated on Bloomberg TV this morning while adding that the fed funds rate range should ultimately be reduced by at least 150 basis points.

While today's advance is not as broad-based as yesterday's, the rate cut optimism has garnered enough buying interest in certain pockets of the market to offset some expected profit taking. 

Homebuilder stocks are up significantly today, with names like Lennar (LEN 131.68, +7.21, +5.79%), PulteGroup (PHM 129.57, +6.24, +5.06%), and D.R. Horton (DHI 165.49, +7.24, +4.57%) underpinning a 1.1% gain in the consumer discretionary sector, while iShares U.S. Home Construction ETF shows a 3.3% gain today. 

Elsewhere, the health care sector (+1.4%) is the best-performing S&P 500 sector, benefitting from strength in its biotechnology names and strong leadership in top names such as Eli Lilly (LLY 658.42, +18.99, +2.97%) and UnitedHealth (UNH 271.06, +9.49, +3.63%). Investors are continuing this week's trend of bargain hunting in the worst-performing S&P 500 sector this year. The sector has gained 2.3% this week but is still down 3.4% for the year. 

Six total S&P 500 sectors trade in positive territory, and while the major averages have pulled back from early session highs, breadth figures still reflect strong buying interest, with advancers outpacing decliners by a roughly 20-to-7 margin on the NYSE and a roughly 7-to-3 margin on the NASDAQ.

Smaller stocks are continuing their trend of outperformance, with the Russell 2000 gaining 1.3% today. Meanwhile, mega-cap stocks are largely sitting out today's advance, with weakness in names like NVIDIA (NVDA 179.56, -3.60, -1.97%) and Meta Platforms (META 781.34, -8.66, -1.10%) contributing to a 0.2% retreat in the Vanguard Mega Cap Growth ETF.

Aside from the market's reaction to increased interest rate cut expectations, today's session has been devoid of other notable macro catalysts, and economic data releases were limited to the MBA Mortgage Applications Index for the week ended August 9, which increased 10.9% from a prior increase of 3.1%. 

Treasuries have had a strong start to the day, with rising rate cut expectations sending yields on shorter tenors back to their August lows while the 10-year yield is down seven basis points at 4.23%, sitting four basis points above this month's low.