Stock Market Update

[BRIEFING.COM] The stock market saw broad gains today in reaction to developments on the geopolitical front, helping the S&P 500 (+1.2%), Nasdaq Composite (+1.4%), and DJIA (+1.4%) rise from their worst levels of the year. 

Equity futures reversed their overnight losses after President Trump said on Truth Social that the U.S. and Iran have engaged in productive discussions to end all hostilities and that strikes on Iranian energy targets will be paused for five days to allow for negotiations. Oil prices retreated sharply, and the major averages opened to gains that eventually saw the S&P 500 and DJIA briefly reclaim their 200-day moving averages. 

The major averages could not sustain all of their early gains, which saw them close below their respective 200-day moving averages. Enthusiasm was somewhat tempered by multiple reports that Iranian officials denied any negotiations with the U.S., leaving the market to question the validity of an off-ramp to the conflict. 

Still, President Trump's desire to negotiate a deal reflects a clear shift in rhetoric, which helped underpin today's risk-on move and ease some near-term concerns about further escalation in the conflict, even as uncertainty around the situation remains elevated.

All eleven S&P 500 sectors finished at or above their flatlines. The health care sector (flat) was the only sector that failed to secure a gain, as today's improvement in risk sentiment saw more defensive pockets of the market lag, with the consumer staples sector (+0.4%) logging a modest gain. 

Even the energy sector (+1.1%) captured a nice gain despite crude oil futures settling today's session $9.93 lower (-10.1%) at $88.19 per barrel.

Meanwhile, the consumer discretionary sector (+2.5%) notched the widest gain, with cruise lines such as Norwegian Cruise Line (NCLH 20.13, +1.18, +6.23%) among the outperformers amid the falling price of oil. 

Tesla (TSLA 380.83, +12.87, +3.50%) was a "magnificent seven" standout in a solid day for mega-cap stocks, with the Vanguard Mega Cap Growth ETF finishing 1.5% higher. 

Elsewhere, the top-weighted information technology sector (+1.5%) also outperformed today. Strength across Palantir Technologies (PLTR 160.90, +10.22, +6.78%) and other software names pushed the iShares GS Software ETF 1.8% higher. 

Semiconductor names surged out of the gate, with the PHLX Semiconductor Index trading more than 3.0% higher this morning. The index finished with a more modest 1.3% gain as weakness across Micron (MU 404.35, -18.55, -4.39%) and other memory storage names tempered gains. 

Outside of the S&P 500, the Russell 2000 (+2.3%) and S&P Mid Cap 400 (+1.9%) outperformed as the uptick in risk sentiment favored growth stocks today. 

All told, today's session reflected a market eager to respond to any signs of de-escalation, with the sharp pullback in oil prices fueling a broad risk-on move. Still, the inability to hold key technical levels highlights lingering uncertainty, leaving investors sensitive to further geopolitical headlines in the near term.

U.S. Treasuries began the week with gains across the curve, pressuring yields from Q1 highs, amid some improvement in geopolitical sentiment. The 2-year note yield settled down six basis points to 3.83%, and the 10-year note yield settled down six basis points to 4.33%. 

• S&P Mid Cap 400: +1.6% YTD
• Russell 2000: +0.5% YTD
• S&P 500: -3.9% YTD
• DJIA: -3.9% YTD
• Nasdaq Composite: -5.6% YTD

Reviewing today's data:

• January Construction Spending -0.3% (Briefing.com consensus 0.1%); Prior was revised to 0.8% from 0.3%
  
  • The key takeaway from the report is that the weakness was paced by a decline in private residential spending, which is believed to be a knock-on effect of labor constraints and higher interest rates.