Stock Market Update

[BRIEFING.COM] The stock market's early strength, fueled by Oracle's (ORCL 328.33, +86.82, +35.95%) massive RPO update and an encouraging August PPI print, quickly lifted the S&P 500 (+0.3%) and Nasdaq Composite (flat) to fresh record highs. However, momentum faded as the session wore on, with investors showing reluctance to extend gains, leaving the major averages to close well below their early peaks.

The S&P 500 set an all-time high level of 6,555.97 this morning and captured a record closing high of 6,532.04. The Nasdaq Composite set an all-time high of 22,000.97 around the same time and eked out a record closing high of 21,886.06. The DJIA (-0.5%) never breached its flatline, highlighting pockets of weakness in today's market.

Oracle's extraordinary upwards move was the main driver of action today. Investors were enthused by the company's remaining performance obligations (RPO), which skyrocketed to $455 billion, up 359% year-over-year, as the company has locked in substantial cloud contracts among major AI players. 

Semiconductor names benefitted from increased optimism around AI growth potential, with the PHLX Semiconductor Index closing with a 2.4% gain. NVIDIA (NVDA 177.33, +6.57, +3.85%) and Broadcom (AVGO 369.57, +32.90, +9.77%) were among some of the market's largest names that benefited from Oracle's move and contributed to gains at the index level.

The broader technology sector finished with a 1.8% gain, tying the energy sector (+1.8%) as the best-performing among the eleven S&P 500 sectors.

Not all mega-cap tech names found themselves on the right side of today's action. Amazon (AMZN 230.33, -7.91, -3.32%), Apple (AAPL 226.79, -7.56, -3.23%), and Meta Platforms (META 751.98, -13.72, -1.79%) all incurred notable losses. Oracle's arrival as an even larger player than previously thought within the AI realm could reflect some reallocation of capital away from some of the "magnificent seven" names that have garnered an outsized share of the market's attention. 

The Vanguard Mega Cap Growth ETF finished flat for the day as a result. 

Sector strength was also an almost even split, with six S&P 500 sectors trading lower. The consumer discretionary (-1.6%), consumer staples (-1.1%), health care (-0.9%), and communication services (-0.9%) sectors closed with the widest losses, while the financials (-0.3%) and real estate (-0.1%) sectors faced more modest retreats. 

On the monetary policy front, a deflationary reading of the August PPI (-0.1%; Briefing.com consensus 0.3%) and Core PPI (-0.1%; Briefing.com consensus 0.3%) helped equities surge out of the gate. Rate cut expectations through the end of the year changed very little, which is a sign of strength, as the market is currently expecting 75-basis points of rate cuts before year's end. 

While the market rallied around today's earnings and economic data, a steady retreat from session highs reflects a hesitancy to push further into record territory, as investors balance AI-driven growth with historically high valuations. 

The market's next test will be tomorrow's August CPI report, which, in conjunction with the weekly jobless claims data, will put October and December rate cut expectations in focus.

U.S. Treasuries climbed on Wednesday after overcoming some early softness with help from the August PPI report and a strong $39 billion 10-year note reopening. The 2-year note yield settled down three basis points to 3.53%, and the 10-year note yield settled down four basis points to 4.03%. 

• Nasdaq Composite: +13.3% YTD
• S&P 500: +11.1% YTD
• DJIA: +6.9% YTD
• Russell 2000: +6.6% YTD
• S&P Mid Cap 400: +4.7% YTD

Reviewing today's data:

• Weekly MBA Mortgage Applications Index 9.2%; Prior -1.2%
• August PPI -0.1% (Briefing.com consensus 0.3%); Prior was revised to 0.7% from 0.9%, August Core PPI -0.1% (Briefing.com consensus 0.3%); Prior was revised to 0.7% from 0.9%
  • The key takeaway from the report is that it will ease the market's angst about pass-through effects for consumers, especially with the index for final demand services sliding 0.2% month-over-month. The added takeaway is that this report will keep the market locked on its view that there will be at least 75 basis points of rate cuts by the Fed before the end of the year.
• July Wholesale Inventories 0.1% (Briefing.com consensus 0.2%); Prior 0.2%