Stock Market Update

[BRIEFING.COM] The S&P 500 (+0.7%), Nasdaq Composite (+1.2%), and DJIA (+0.4%) remain firmly higher at midday, although the major averages have backed away from their morning highs as Treasury yields reversed higher. Technology, semiconductor, and mega-cap growth stocks continue to do much of the heavy lifting, but today's advance is accompanied by better participation across the broader market than has been seen recently.

Stocks initially surged following this morning's Employment Situation report, which reinforced expectations that the Fed may refrain from another rate hike at this month's FOMC meeting. Nonfarm payrolls increased by just 29,000, while the unemployment rate ticked up to 4.2% and average hourly earnings increased only 0.1% month-over-month. The probability of the Fed keeping rates unchanged at the October meeting briefly climbed above 80% following the report, according to the CME FedWatch Tool. That probability has since slipped to 76.2%, nearly in line with yesterday, as Treasury yields reversed their initial decline.

The 10-year note yield is now up four basis points to 5.28%, with the rebound in yields taking some momentum out of the stock market's earlier advance. A sharp drop in crude oil also provided early encouragement. WTI crude fell more than 4% after G7 leaders announced a coordinated release of 100 million barrels of oil through the IEA, beginning immediately and extending over four months. Oil has recovered much of that decline, however, and is currently down $1.38 (-1.5%) at $91.49 per barrel.

Despite the pullback from the morning highs, the tone remains broadly positive. Eight of the 11 S&P 500 sectors trade higher, while the Russell 2000 (+0.9%) and S&P Mid Cap 400 (+1.1%) continue to outperform the major averages.

Still, mega-cap and technology stocks are once again providing disproportionate support at the index level. The S&P 500 Equal Weighted Index is up just 0.3%, compared with the 0.7% gain in the cap-weighted S&P 500, while the Vanguard Mega Cap Growth ETF is up 0.9%.

The information technology sector (+1.1%) remains one of the primary sources of leadership, with the PHLX Semiconductor Index up 2.7%. NVIDIA (NVDA 235.36, +4.50, +1.95%) is among the notable semiconductor winners, while all seven "Magnificent Seven" stocks trade higher.

There is some pronounced divergence within the broader technology landscape. Western Digital (WDC 403.94, -58.62, -12.67%) and Seagate Tech (STX 827.14, -118.43, -12.52%) are under heavy pressure after Toshiba announced an expansion of HDD production in the Philippines, raising concerns that additional industry capacity could eventually loosen the tight supply-demand environment that has supported strong pricing and margins. 

The consumer discretionary sector (+1.3%) is another standout, supported by a sizable gain in Tesla (TSLA 372.12, +18.01, +5.09%) after the company reported Q3 deliveries of 486,532 vehicles, above its company-compiled analyst consensus of 461,974. That strength is outweighing a sharp post-earnings decline in NIKE (NKE 33.34, -1.80, -5.14%), which is among the worst-performing S&P 500 components and has fallen to fresh decade lows following a disappointing FY27 outlook.

The materials sector (+1.1%) is also among the day's better-performing groups. At the other end of the standings, the health care (-0.3%), consumer staples (-0.1%), and financials (-0.1%) sectors are the only groups trading lower.

Overall, today's action represents an improvement from the weak participation that has characterized much of the market's recent trade, particularly with small- and mid-cap stocks outperforming. Even so, the sizable gap between the cap-weighted and Equal-Weight S&P 500 shows that mega-cap growth and technology stocks remain an outsized source of support for the major averages.