Stock Market Update

[BRIEFING.COM] The S&P 500 (-1.8%), Nasdaq Composite (-3.0%), and DJIA (-0.9%) are in the midst of their toughest session of the week, which is poised to end a nine-week winning streak for the S&P 500. Technology stocks, and in particular, semiconductors, are under considerable pressure again today, while a stronger payroll increase of 172,000 in the May Employment Situation Report (Briefing.com consensus 96,000) has added upward pressure to the market's expectations of a rate hike.

The information technology sector (-4.6%) is steadily charting session lows, with weakness in prominent semiconductor names such as Advanced Micro Devices (AMD 472.71, -50.49, -9.65%) and Micron (MU 896.88, -99.11, -9.95%) sending the PHLX Semiconductor Index 7.8% lower.

Prominent software names such as Oracle (ORCL 214.85, -21.49, -9.09%) are under pressure as well, leaving the iShares GS Software ETF 3.6% lower.

Mega-cap stocks elsewhere are not faring much better, with Tesla (TSLA 396.14, -22.31, -5.33%) and Meta Platforms (META 609.82, -17.74, -2.83%) among the "magnificent seven" laggards, contributing to weakness in the Vanguard Mega Cap Growth ETF (-2.6%).

The consumer discretionary (-1.0%) and communication services (-1.0%) sectors are lower as a result.

Elsewhere in the consumer discretionary sector, lululemon athletica (LULU 114.28, -10.64, -8.52%) trades sharply lower after cutting its full year guidance after narrowly topping earnings estimates.

Growth stocks are broadly weaker today as Treasury yields rise in response to the May employment report, which has prompted traders to increase their expectations for further Fed tightening. The CME FedWatch Tool now assigns roughly a 71% probability to a rate hike at the December FOMC meeting, up from around 50% yesterday.

There is some rotation into more defensive-oriented sectors today, with the consumer staples (+2.1%), health care (+1.5%), and utilities (+0.9%) sectors all trading higher. The real estate sector (+1.1%) is the only other S&P 500 sector that holds a gain.

Outside of the S&P 500, the Russell 2000 (-2.9%) is underperforming amid the spike in yields.

Overall, today's weakness reflects a continuation of the semiconductor-led pullback that began yesterday, as investors took profits following an extended rally across AI and chip-related names. The stronger-than-expected employment report added another layer of pressure by pushing Treasury yields higher and increasing expectations for further Fed tightening, accelerating the retreat in growth-oriented areas of the market.

Reviewing today's data:

• May Nonfarm Payrolls 172K (Briefing.com consensus 96K); Prior was revised to 179K from 115KMay Nonfarm Private Payrolls 120K , (Briefing.com consensus 89K); Prior was revised to 177K from 123K, May Unemployment Rate 4.3% (Briefing.com consensus 4.3%); Prior 4.3%, May Average Hourly Earnings 0.3% (Briefing.com consensus 0.3%); Prior 0.2%, May Average Workweek 34.3 (Briefing.com consensus 34.3); Prior 34.3
  • The key takeaway from the report is that it is manna for headline writers but still lacks some important sustenance to suggest it is a marker of an economy running on a full stomach. To wit: real average hourly earnings on a year-over-year basis are down 0.4%; there were job losses in the retail trade (-1,100), information (-2,000), and financial (-22,000) industries; and the percentage of unemployed workers for 27 weeks or more increased to 27.5% from 25.3%, which we will assume speaks to the difficulty of finding a new job with comparable compensation to the prior one.