Stock Market Update

[BRIEFING.COM] The major averages finished firmly higher on Thursday, snapping a three-session losing streak as AI and mega-cap stocks returned to the forefront and easing Treasury yields and crude oil prices provided some relief from yesterday's post-FOMC selloff. The S&P 500 (+1.1%) moved back above 7,600 and its 50-day moving average (7,614.9), while the Nasdaq Composite (+1.7%) led and the DJIA (+0.6%) also posted a solid gain.

Buying interest extended beyond the largest technology names, although some of the broader market lost ground relative to the major averages as the session progressed. Advancers still outpaced decliners by roughly 2-to-1 at the NYSE and by more than 2-to-1 at the Nasdaq, while the Russell 2000 (+0.6%) and S&P Mid Cap 400 (+0.6%) finished higher but well behind the Nasdaq.

Technology stocks provided the clearest source of leadership. The information technology sector (+2.2%) finished comfortably atop the sector standings as the PHLX Semiconductor Index surged 3.1%. Intel (INTC 108.80, +7.75, +7.67%) extended yesterday's sharp advance, which followed reports that SK hynix Inc. (SKHY 182.99, +8.12, +4.64%) is in exploratory talks with the company over potential U.S. chip production. Advanced Micro Devices (AMD 545.09, +32.59, +6.36%) and Arm Holdings plc (ARM 264.90, +20.92, +8.57%) were also notable gainers, with ARM supported by CEO Rene Haas's comments that the company is confident it can secure enough supply to meet roughly $2 billion in customer demand. NVIDIA (NVDA 219.34, +5.44, +2.54%) added to the semiconductor strength after CEO Jensen Huang discussed plans to double chip sales at a UK event today, according to CNBC.

Strength was not limited to chipmakers. The iShares GS Software ETF gained 0.8%, with Oracle (ORCL 150.58, +7.42, +5.18%) and Workday (WDAY 199.28, +11.52, +6.14%) among the group's notable outperformers, while all seven Magnificent Seven stocks finished higher and the Vanguard Mega Cap Growth ETF rose 1.6%.

That strength also helped the consumer discretionary sector (+1.4%) outperform, while the decline in Treasury yields offered support to rate-sensitive areas such as homebuilders. The iShares U.S. Home Construction ETF gained 0.5%.

AI infrastructure remained another pocket of pronounced strength. Generac (GNRC 207.20, +32.09, +18.33%) finished among the best-performing S&P 500 components after announcing a long-term agreement to supply Amazon (AMZN 251.19, +5.23, +2.13%) with backup generators for its data centers, along with a warrant allowing Amazon to acquire up to roughly 1.7 million Generac shares.

Super Micro Computer (SMCI 40.35, +3.50, +9.50%) and Hewlett Packard Enterprise (HPE 61.06, +4.38, +7.73%) also posted outsized gains amid broader strength in AI server and data-center names.

The utilities sector (+0.9%) was another relative outperformer as Treasury yields retreated. The 10-year note yield settled six basis points lower at 4.95%, reversing a portion of the increase that followed Fed Chair Kevin Warsh's press conference yesterday and easing one of the more significant headwinds facing equities in recent sessions. 

Crude oil also moved lower, though it recovered substantially from its intraday low. WTI crude settled $0.38 lower (-0.4%) at $102.03 per barrel after coming under pressure earlier in the session following reports that President Trump is expected to meet with Gulf leaders next week to discuss next steps in the conflict with Iran. The energy sector (+0.6%) nevertheless finished higher alongside the broader market.

Performance was less convincing in a few areas. The communication services sector (+0.6%) benefited from gains in Alphabet (GOOG 343.68, +4.32, +1.27%) and Meta Platforms (META 682.31, +9.00, +1.34%) despite pronounced weakness among several of its other components, while the financials sector (-0.1%) was the only sector to finish lower as banking stocks remained under pressure following yesterday's rate hike.

The consumer staples sector finished unchanged as growth stocks led the market higher today.

Thursday's advance ultimately reversed a meaningful portion of Wednesday afternoon's Fed-driven decline. The FOMC's 25-basis-point rate hike had generated little immediate reaction before Mr. Warsh's emphasis on persistent above-target inflation fueled expectations for additional tightening and sent Treasury yields higher. The retreat in yields and crude oil today removed some of those pressures, while renewed enthusiasm for semiconductors, AI infrastructure, and mega-cap growth stocks helped the S&P 500 reclaim its 50-day moving average and end its three-day losing streak.

U.S. Treasuries climbed on Thursday with the long bond extending its modest post-FOMC advance while the front end recovered a portion of its loss from Wednesday. The 2-year note yield settled down four basis points t0 4.69%, and the 10-year note yield settled down six basis points to 4.95%. 

• Russell 2000: +15.9% YTD
• Nasdaq Composite: +13.7% YTD
• S&P 500: +11.6% YTD
• S&P Mid Cap 400: +10.8% YTD
• DJIA: +7.7% YTD

Reviewing today's data:

• Housing starts declined 2.6% month-over-month in August to a seasonally adjusted annual rate of 1.275 million (Briefing.com consensus: 1.325 million), although single-unit starts were up 7.6%. Building permits declined 2.7% month-over-month to a seasonally adjusted annual rate of 1.394 million (Briefing.com consensus: 1.410 million).
  • The key takeaway from the report is that building permits—a leading indicator—were flat to down across all regions for single-unit dwellings.
• Aug Building Permits 1394K (Briefing.com consensus 1410K; Prior 1433K)
• Initial jobless claims for the week ending September 12 decreased by 10,000 to 196,000 (Briefing.com consensus: 209,000). Continuing jobless claims for the week ending September 5 decreased by 39,000 to 1.730 million.
  • The key takeaway from the report is the remarkably low level of initial jobless claims, which suggests a low-firing environment.
• Sep Philadelphia Fed Index 37.8 (Briefing.com consensus 35.0; Prior 47.4)
• Aug Pending Home Sales 0.3% (Briefing.com consensus 0.5%; Prior -2.6%)
• 09/12 EIA Natural Gas Inventories +44 bcf (Prior +40 bcf)