Stock Market Update

[BRIEFING.COM] The stock market opened to early gains as investors were enthused by the announcement of semiconductor tariff carveouts, but these gains were quickly ceded as the market succumbed to relatively broad-based selling activity that saw the major averages close mostly lower.

The information technology sector (+0.4%) surged out of the gate following yesterday afternoon's announcement from President Trump that companies committed to domestic production will be exempt from an impending 100% tariff rate on chips and semiconductors. 

NVIDIA (NVDA 180.77, +1.35, +0.75%) hit a fresh record high of 183.88, and the PHLX Semiconductor Index was up as much as 2.7%. Ten S&P 500 sectors traded in positive territory during the morning rush, pushing the S&P 500 (-0.1%) within 0.6 points of its all-time closing high (6,389.77).

After testing record levels, stocks quickly began to retreat. At first, the sell-off was broad-based, with nine sectors trading in negative territory, though the technology sector still held a bulk of its early gains, which kept the major averages in positive territory. 

The major averages hit session lows below their flatlines around 2:30 PM ET, as the technology sector flipped into negative territory. A modest late-session advance helped the sector finish with a gain of 0.3%, largely due to continued strength in Apple (AAPL 220.03, +6.78, +3.18%) following yesterday's $100 billion investment increase in domestic production and relative strength among chipmakers that saw the PHLX Semiconductor Index finish with a gain of 1.5%, just over half of its early advance. 

The Nasdaq Composite (+0.4%) eked out a closing gain, while the S&P 500 (-0.1%) could not quite resurface above its flatline, and the DJIA (-0.5) posted a wider loss. 

A lack of major developments makes it difficult to pin today's retreat on any one factor, but it is worth noting that increased tariff rates for several key partners went into effect last night, pushing the effective tariff rate near historical levels. While the market has been quick to focus on optimistic developments on the trade front, there is still uncertainty around how the economy will respond to a higher tariff environment.

A weaker-than-expected initial jobless claims report also points to a softening labor market. 

Though the market closed well below its early highs, losses were relatively modest. Only the health care (-1.2%) and financials (-1.1%) sectors closed with losses greater than 0.5%. 

The health care sector faced pressure out of the gate as its largest component, Eli Lilly (LLY 640.61, -105.76, -14.17%), traded sharply lower in response to results from its weight-loss drug pill trial. Those results, on the surface, were positive, yet they reportedly didn't measure up to the competition, showing a 12.4% weight loss versus 15% for Novo Nordisk A/S (NVO 48.76, +3.38, +7.45%) weight-loss drug pill and an overall dropout rate of 24.4% at the highest dose.

Excluding the loss in the health care sector, defensive sectors outperformed today, as the utilities (+1.1%) and consumer staples (+0.7%) sectors closed with the largest gains.

Crude oil fell to its lowest closing level since early June, settling $0.49 (-0.8%) lower at $63.85 per barrel.

There were some notable developments in regard to President Trump's anticipated Federal Reserve Board nominations.

Bloomberg reported that Fed Governor Chris Waller is emerging as the top choice for Fed Chair among Trump's team of advisors, though a White House official stated that until the president speaks on the matter himself, this is speculative. 

Just before the close, President Trump announced via Truth Social that he selected Dr. Stephen Miran to serve in Adriana Kugler's just-vacated seat on the Federal Reserve Board until January 31, 2026. In the meantime, the president will search for a more permanent replacement.

U.S. Treasuries modestly retreated on Thursday as the market digested the July Survey of Consumer Expectations from the New York Fed and a disappointing $25 billion 30-year bond sale that once again saw below-average foreign demand. The 2-year note yield settled up three basis points to 3.73%, the 10-year note yield settled up two basis points to 4.24%, and the 30-year note yield settled up one basis point to 4.82%.

• Nasdaq Composite: +2.9% WTD
• Russell 2000: +2.2% WTD
• S&P 500: +1.6% WTD
• DJIA: +0.9% WTD
• S&P Mid Cap 400: +0.6% WTD

Reviewing today's data: 

• Q2 Productivity - Prel 2.4% (Briefing.com consensus 2.2%); Prior was revised to -1.8% from -1.5%, Q2 Unit Labor Costs - Prel 1.6% (Briefing.com consensus 1.5%); Prior was revised to 6.9% from 6.6%
  • The key takeaway from the report is that productivity improved noticeably from the first quarter, helping to tamp down unit labor costs. The 1.8% annualized rate of productivity growth in the current business cycle (starting Q4 2019), though, is still below the long-term rate of 2.1% since the first quarter of 1947.
• Weekly Initial Claims 226K (Briefing.com consensus 220K); Prior was revised to 219K from 218K, Weekly Continuing Claims 1.974 mln; Prior was revised to 1.936 mln from 1.946 mln
  • The key takeaway from the report, in light of the soft nonfarm payrolls data seen last week, is the jump in continuing jobless claims, which will be seen as a sign/symptom of a softening labor market.
• June Wholesale Inventories 0.1% (Briefing.com consensus 0.2%); Prior -0.3%
• Consumer credit increased by $7.4 billion in June (Briefing.com consensus: $8.6 billion) following an unrevised $5.1 billion increase in May.
  • The key takeaway from the report is that the entirety of the consumer credit expansion in June was driven by nonrevolving credit.