Stock Market Update

[BRIEFING.COM] The stock market has captured healthy gains in the first half of trading, with a number of yesterday's lagging sectors rebounding as September rate cut expectations further solidify.

The broad-based nature of today's advance has resulted in greater parity at the index level in comparison to yesterday's mixed finish, with the S&P 500 (+0.4%), Nasdaq Composite (+0.4%), and DJIA (+0.4%) moving in lockstep throughout the session. 

Eight S&P 500 sectors trade higher, with the consumer discretionary sector (+1.7%) leading the way due to strength in Amazon (AMZN 234.18, +8.19, +3.62%). Additionally, the energy (+0.9%), financials (+0.7%), and industrials (+0.7%) sectors also hold gains wider than 0.5%.

Only the utilities (-0.6%), materials (-0.1%), and real estate (-0.1%) sectors hold losses.

The major averages have steadily improved with changes in the information technology sector (flat), which recently surfaced above its flatline after facing early pressure.

Additionally, the communication services sector (+0.3%) trades higher after an early loss, with Meta Platforms (META 748.78, +11.73, +1.59%) and Netflix (NFLX 1253.04, +26.86, +2.19%) offsetting pressure in Alphabet (GOOG 228.64, -2.46, -1.07%) after yesterday's rally.

The Associated Press reports that President Trump is hosting a dinner at the White House this evening that features an ensemble cast of notable tech CEOs, though Tesla (TSLA 334.37, +0.28, +0.09%) CEO Elon Musk is notably absent from the invite list.

For the time being, mega-cap names as a whole are performing in line with the broader market, with the Vanguard Mega Cap Growth ETF advancing 0.4%.

Smaller-cap names are faring even better. The Russell 2000 is up 0.6%, and the S&P MidCap 400 is up 0.8%.

Although corporate headlines are relatively thin today, the market received a sizable slate of economic data this morning, with some softness in the labor market bolstering expectations of a September rate cut.

Initial jobless claims ticked up to 237,000 (Briefing.com consensus 232,000), ADP Employment Change came in softer at 54,000 (Briefing.com consensus 69,000), and the ISM Services Employment Index contracted for a third straight month. While not enough to define the labor market as weak, the data underscore ongoing softness.

On the brighter side, Q2 productivity was revised higher to 3.3% (Briefing.com consensus 2.4%), while unit labor costs were revised down to 1.0% (Briefing.com consensus 1.6%), strengthening the case for a September rate cut.

New York Fed President John Williams (FOMC voting member) stated in a speech today that he anticipates interest rates moving toward more neutral levels, citing a gradual cooling in the labor market.

The probability of a 25-basis point rate cut at the September FOMC meeting currently stands at 97.6%, according to the CME FedWatch Tool.

The market also received a mixed batch of earnings reports this morning, including those from Salesforce (CRM 242.00, -14.45, -5.63%), Hewlett Packard Enterprise (HPE 23.64, +0.82, +3.57%), American Eagle (AEO 18.47, +4.85, +35.60%), Ciena (CIEN 111.64, +16.82, +17.74%), and Figma (FIG 55.78, -12.35, -18.13%). 

Reviewing today's data:

• August ADP Employment Change 54K (Briefing.com consensus 69K); Prior was revised to 106K from 104K
• July Trade Balance -$78.3 bln (Briefing.com consensus -$64.2 bln); Prior was revised to -$59.1 bln from -$60.2 bln
  • The key takeaway from the report is that the surge in imports reflects an easing of some of the tariff pressures that had been applied by the announcement of higher reciprocal rates. The downside, however, is that the net export component will be a negative component in the calculation of Q3 GDP.
• Q2 Productivity-Rev. 3.3% (Briefing.com consensus 2.4%); Prior 2.4%, Q2 Unit Labor Costs - Rev 1.0% (Briefing.com consensus 1.6%); Prior 1.6%
  • The key takeaway from the report is that it hit a sweet spot of signalling stronger productivity growth and a modest increase in unit labor costs.
• Weekly Initial Claims 237K (Briefing.com consensus 232K); Prior 229K, Weekly Continuing Claims 1.940 mln; Prior was revised to 1.944 mln from 1.954 mln
  • The key takeaway from the report is that there still isn't a strong weakening message being delivered by initial jobless claims, which were up from the prior week but still remain relatively low on a historical basis.
• August S&P Global U.S. Services PMI - Final 54.5; Prior 55.4
• August ISM Services 52.0% (Briefing.com consensus 50.5%); Prior 50.1%
  • The key takeaway from the report is that it is a mixed bag for policymakers, featuring faster growth overall but an ongoing contraction in employment and a continuation of price pressures for services organizations.