Stock Market Update

[BRIEFING.COM] The S&P 500 (+0.4%), Nasdaq Composite (+0.3%), and DJIA (+0.2%) finished the month and quarter on a modestly positive note by closing near session highs after a choppy session of mixed sector strength.

The healthcare sector (+2.5%) led the seven advancing S&P 500 sectors, rising after President Trump announced that Pfizer (PFE 25.48, +1.62, +6.81%) will lower the prices of its medications in the U.S. and sell some through a new government-run direct-to-consumer site, TrumpRx. Eli Lilly (LLY 762.50, +35.99, +4.95%) also gained on reports it is negotiating to participate, while Merck (MRK 83.92, +5.34, +6.80%), Amgen (AMGN 282.20, +8.23, +3.00%), and other large-cap peers followed higher, lifting the broader sector.

The positive headline catalyst culminated in a strong day for what has been the most underbought sector this year, with today's gains lifting the sector back into positive territory for the year. 

The major averages also benefitted from a 0.9% gain in the information technology sector, which unsurprisingly finished as the best-performing sector this quarter with a 13.0% quarter-to-date gain.

NVIDIA (NVDA 186.58, +4.72, +2.60%) traded to a new record high level, while the broader PHLX Semiconductor Index finished up 0.9%, capping an impressive 12.3% advance in September.

Meanwhile, the consumer discretionary (-0.6%) and communication services (-0.5%) incurred modest losses as several of their key mega-cap names traded lower.

The energy sector (-1.1%) was once again the top laggard, with crude oil futures settling today's session $1.11 lower (-1.8%) at $62.37 per barrel. The financials sector (-0.5%) rounds out today's four retreating S&P 500 sectors.

Smaller cap indices such as the Russell 2000 (+0.1%) and S&P Mid Cap 400 (+0.1) also underperformed the broader market, despite today's economic data providing a boost to the market's expectations for additional rate cuts this year. 

The Conference Board's Consumer Confidence Index fell to 94.2 in September (Briefing.com consensus: 96.0%) from an upwardly revised 97.8 in August, reinforcing expectations for further Fed easing. The CME FedWatch tool now shows a 96.7 percent chance of a 25-basis point cut in October (from 89.8% yesterday) and a 77.7 percent chance of another cut in December (from 66.8% yesterday).

Commentary from Fed officials was mixed today. Fed Vice Chair Phillip Jefferson (FOMC voting member) noted downside risks to employment and upside risks to inflation, while Boston Fed President Susan Collins (FOMC voting member) said modest easing could be appropriate, but a restrictive stance remains warranted. Chicago Fed President Austan Goolsbee (FOMC voting member) said he is not overly concerned about the labor market.

In other macro developments, a government shutdown is still imminent as the funding deadline expires at midnight with no resolution in sight. While the market has been largely unphased by the looming shutdown, it would prevent the release of several key economic data reports, which could further complicate the market's monetary policy expectations. 

For now, the market remains almost certain of additional easing this year, providing another tailwind for equities in what was a surprisingly strong September that saw the S&P 500 (+3.5% month-to-date), Nasdaq Composite (+5.6% month-to-date), and DJIA (+1.9% month-to-date) all capture decent month-to-date gains.

U.S. Treasuries ended Tuesday on a mixed note, as 10s and 30s recorded modest losses while shorter tenors finished in the green. The 2-year note yield settled down 3 basis points to 3.60% (-2 basis points in September) and the 10-year note yield settled up one basis point to 4.15% (-8 basis points in September).

• Nasdaq Composite: +17.3% YTD
• S&P 500: +13.7% YTD
• Russell 2000: +9.3% YTD
• DJIA: +9.1% YTD
• S&P Mid Cap 400: +4.6% YTD

Reviewing today's data:

• The Conference Board's Consumer Confidence Index fell to 94.2 in September (Briefing.com consensus 96.0) from an upwardly revised 97.8 (from 97.4) in August. In the same period a year ago, the index stood at 99.2.
  • The key takeaway from the report is that consumers felt much less positive about business conditions, with thoughts about job availability hitting multi-year lows. That consideration will underpin the market's thinking that another rate cut is at least coming at the October FOMC meeting.
• The Chicago PMI hit 40.6 in September (Briefing.com consensus 41.0), down from 41.5 in August.
• The FHFA Housing Price Index was down 0.1% month-over-month in July after decreasing 0.2% in June.
• The S&P Case-Shiller Home Price Index was up 1.9% year-over-year in July (Briefing.com consensus 1.9%), down from a revised 2.2% (from 2.1%) in June.
• Job openings increased to 7.227 million in August from a revised 7.208 million (from 7.181 million) in July.