Stock Market Update

[BRIEFING.COM] There were no record-setting performances today among the S&P 500 (-0.3%), Nasdaq Composite (-0.3%), or DJIA (-0.4%), as persistent mega-cap weakness eventually prompted selling activity across the broader market.

While today's price action never reflected a "buy the dip" play, equities hung tough in the morning hours, with broader market strength almost negating mega-cap losses at the index level. 

That would change just before midday as a sell-off ensued, turning breadth figures negative and dragging several S&P 500 sectors beneath their flatlines. 

Decliners would go on to outpace advancers by a roughly 8-to-5 ratio on the NYSE and a roughly 4-to-3 clip on the Nasdaq.

Seven S&P 500 sectors closed in negative territory, with the materials sector (-1.6%) retreating the furthest after Freeport-McMoRan (FCX 37.67, -7.69, -16.95%) sold off on news it had cut Q3 sales guidance following a fatal mud rush incident at an Indonesian mine, according to Yahoo! Finance.

Meanwhile, the communication services (-0.8%) and information technology (-0.5%) sectors faced the brunt of today's mega-cap weakness.

Within the technology sector, Micron (MU 161.71, -4.70, -2.82%) traded lower after an impressive beat and raise earnings report, and Oracle (ORCL 308.44, -5.39, -1.72%) faced a loss despite announcing five new U.S. AI data center sites under the Stargate Project—an ambitious AI infrastructure initiative that includes OpenAI and Softbank (SFTBY 63.27, +1.65, +2.68%).

The technology sector and PHLX Semiconductor Index (-0.2%) would still finish well off their session lows, supported by a late afternoon report from Bloomberg that Intel (INTC 31.22, +1.88, +6.41%) is pursuing an investment from Apple (AAPL 252.31, -2.12, -0.83%). 

Nonetheless, the market's overall subdued reaction to a batch of AI-related headlines is striking considering similar news catalysts sparked a record-setting rally on Monday. With Fed Chair Powell's remarks that stocks are "fairly highly valued" fresh in the minds of investors, it is not all that surprising that market's largest names faced a pullback.

Ultimately the pullback was modest in the scope of recent gains, with the Vanguard Mega Cap Growth ETF (-0.4%) retreating less than half of a percentage point. 

Additionally, there were some pockets of strength in the market (and even across the mega-cap cohort) that prevented further losses at the index level.

Tesla's (TSLA 442.80, +16.95, +3.98%) strong showing prompted a 0.7% gain in the consumer discretionary sector. The sector saw early strength among homebuilder names after a surprisingly strong August New Home Sales report (800,000; Briefing.com consensus 650,000), though the iShares U.S. Home Construction ETF (+0.1%) would cede nearly all of its gain.

Elsewhere, the energy sector (+1.2%) led all sectors today as crude oil futures settled $1.56 higher at $65.00 per barrel, an increase of 2.5%.

The defensive utilities (+0.7%) and consumer staples (+0.1%) sectors also closed with gains.

The market heard from Chicago Fed President Austan Goolsbee (voting FOMC member), who told The Financial Times that he does not expect a recession and might not be in favor of a series of additional rate cuts.

Rate cut expectations for the October and December FOMC meetings have held steady this week. With expectations for further monetary policy easing a driving force behind the market's recent record highs, investors will look to Friday's PCE Price Index as a potential catalyst for the next directional move.

U.S. Treasuries retreated on Wednesday, lifting the 5-year yield to its highest level in three weeks while yields on longer tenors returned toward their highs from Monday.

The 2-year note yield settled up one basis point to 3.60%, the 5-year note yield settled up three basis points to 3.71%, and the 10-year note yield settled up three basis points to 4.15%. 

• Nasdaq Composite: +16.5% YTD
• S&P 500: +12.9% YTD
• Russell 2000: +9.2% YTD
• DJIA: +8.4% YTD
• S&P Mid Cap 400: +4.3% YTD

Reviewing today's data:

• Weekly MBA Mortgage Applications Index 0.6%; Prior 29.7%
• August New Home Sales 800K (Briefing.com consensus 650K); Prior was revised to 664K from 652K
  • The key takeaway from the report is that the surge in new home sales occurred ahead of the larger drop in mortgage rates seen in September. Notably, there was a big uptick in the percentage of new homes sold over $800,000. That helps explain the large jump in average selling prices, and it may also be reflective of the large jump in stock prices lending some confidence to buying interest in the upper price brackets.