Stock Market Update

[BRIEFING.COM] The stock market is starting the second quarter on a higher note, with optimism around a potential ceasefire between the U.S. and Iran culminating in a second consecutive day of broad gains and retreating oil prices.

The S&P 500 (+1.2%), Nasdaq Composite (+1.8%), and DJIA (+1.0%) are firmly higher, with the DJIA now sitting a touch above its 200-day moving average of 46,698.

Potential ceasefire negotiations between the U.S. and Iran continue to drive headlines today. Reuters reported that Iran has denied claims it requested a ceasefire, though that has done little to temper enthusiasm, as both sides continue to strike a more conciliatory tone this week. In particular, Bloomberg reported that President Trump told aides that the U.S. will withdraw from the conflict in two to three weeks, even if a deal has not been struck.

There are also some potentially favorable headlines surrounding a potential reopening of the Strait of Hormuz. Financial Times reported that the UK will hold talks with 35 other nations regarding a coalition to reopen the Strait of Hormuz, while The Wall Street Journal reported that the United Arab Emirates seeks to pressure Iran to reopen the strait. Crude oil is currently down $1.34 (-1.3%) to $100.04 per barrel, resulting in a sharp pullback in the energy sector (-4.1%).

The market will look for more clarity on the geopolitical front tonight as President Trump is set to give an address at 9:00 p.m. ET.

For the time being, stocks are enjoying another session of broad gains. Mega-cap stocks are seeing an extension of yesterday's rally, supporting gains at the index level. The Vanguard Mega Cap Growth ETF is up 1.7% as all of the "magnificent seven" stocks trade higher.

Alphabet (GOOG 297.36, +10.50, +3.66%) and Meta Platforms (META 589.93, +17.80, +3.11%) are standouts among the group, pushing the communication services sector (+2.5%) to the top of the sector leaderboard as the companies continue to rebound from a poor showing last week.

The top-weighted information technology sector (+1.6%) also sports a solid gain, supported by an extension of yesterday's semiconductor rally. The PHLX Semiconductor Index is up 3.8%, with particular strength across memory storage names such as Micron (MU 376.59, +38.75, +11.47%) and Western Digital (WDC 297.56, +27.07, +10.01%).

Mega-cap leadership and broad gains throughout the consumer discretionary sector (+1.5%) seat it with a similar gain, offsetting a sharp retreat in NIKE (NKE 45.40, -7.42, -14.06%) after the company topped earnings estimates but issued weak guidance.

The industrials sector (+2.2%) is another outperformer as electrical component and engineering names continue to rebound, while the lower price of oil supports gains across airline stocks.

Looking at the more defensive pockets of the market, the utilities sector (-0.9%) is a laggard today, while the consumer staples sector (+0.5%) holds one of the narrowest gains across the eleven S&P 500 sectors. The health care sector (+1.2%), however, sports a nice gain as Eli Lilly (LLY 966.34, +46.58, +5.06%) trades sharply higher following confirmation that the FDA approved its new weight-loss drug, Foundayo.

Outside of the S&P 500, the Russell 2000 (+1.5%) and S&P Mid Cap 400 (+1.4%) trade firmly higher as the market displays a clear risk-on disposition today.

Even so, today's advance remains heavily tethered to geopolitical headlines, leaving the market vulnerable to potential swings in sentiment. For now, though, the combination of falling oil prices and broad participation is helping underpin a constructive start to the second quarter.

Reviewing today's data:

• Weekly MBA Mortgage Applications Index -10.4%; Prior -10.5%
• March ADP Employment Change 62K (Briefing.com consensus 42K); Prior was revised to 66K from 63K
• February Retail Sales 0.6% (Briefing.com consensus 0.5%); Prior was revised to -0.1% from -0.2%, February Retail Sales, ex-auto 0.5% (Briefing.com consensus 0.3%); Prior 0.0%
  • The key takeaway from the report is that it revealed solid spending activity across most kinds of retail businesses. The strength of the report is apt to be diluted, however, by the recognition that it preceded the hefty increase in gasoline prices and the sharp decline in stock prices in March that are expected to keep discretionary spending in check.
• March S&P Global U.S. Manufacturing PMI - Final 52.3; Prior 52.4
• March ISM Manufacturing Index 52.7% (Briefing.com consensus 52.3%); Prior 52.4%
  • The key takeaway from the report is that it conveys an ongoing expansion in manufacturing activity coupled with an ongoing increase in prices for raw materials that works against the notion of the Fed cutting rates soon.
• January Business Inventories -0.1%; Prior was revised to 0.0% from 0.1%