Stock Market Update

[BRIEFING.COM] The S&P 500 rose 1.6% on Tuesday in a relatively broad-based advance. The Dow Jones Industrial Average (+1.5%) kept pace with the benchmark index while the Nasdaq Composite (+2.2%) and Russell 2000 (+2.0%) outperformed with roughly 2% gains.

Ten of the 11 S&P 500 sectors closed higher with gains ranging from 0.6% (utilities) to 2.9% (consumer discretionary). The exception was the energy sector (-1.0%) amid pronounced weakness in oil ($102.07/bbl, -6.11, -5.7%) and natural gas ($7.17/MMBtu, -0.63, -8.0%) prices. 

The broader gains helped the benchmark index close back above its 50-day moving average (4416) after a flat open. 

The muted start transpired amid another increase in interest rates, lackluster reactions to earnings reports, and a view from St. Louis Fed President Bullard (FOMC voter) that the fed funds rate should be at 3.50% by the end of the year.

The fed-funds-sensitive 2-yr yield rose 11 basis points to 2.58% while the 10-yr yield rose five basis points to 2.91% after flirting with 1.93% in the wake of better-than-expected housing starts and building permits data for March. The U.S. Dollar Index increased 0.2% to 101.00. 

The stock market had plenty of reasons to stay cautious, but the counterintuitive price action suggested the rally keyed off a contrarian mindset. To be fair, the lower oil prices likely helped, as did less-hawkish commentary from Chicago Fed President Evans and Atlanta Fed President Bostic, both of whom are not FOMC voters this year. 

Shares of Johnson & Johnson (JNJ 183.08, +5.42, +3.1%) hit a fresh all-time high, putting the focus on the company's EPS beat instead of its below-consensus FY22 EPS guidance. Fellow Dow component Travelers (TRV 176.16, -9.06, -4.9%) fell 5% despite beating top and bottom-line estimates. 

Separately, airline stocks extended their recent outperformance following the removal of the mask mandate for airline travel and public transportation. The U.S. Global Jets ETF (JETS 22.11, +0.60) rose 2.8% today. 

Reviewing Tuesday's economic data:

• Housing starts increased 0.3% month-over-month in March to a seasonally adjusted annual rate of 1.793 million units (Briefing.com consensus 1.750 million) while permits increased 0.4% month-over-month to a seasonally adjusted annual rate of 1.873 million.
  • The key takeaway from the report is that the upside was driven entirely by multi-unit activity. Starts for single-family homes and permits for single-family homes were down 1.7% and 4.8% month-over-month, respectively, reflecting the challenges builders are facing with supply chain issues, rising costs for land and labor, and the dent in homebuyer confidence and affordability that has stemmed from rising mortgage rates.

Looking ahead, investors will receive Existing Home Sales for March, the April Beige Book, and the weekly MBA Mortgage Applications Index on Wednesday.

• Dow Jones Industrial Average -3.9% YTD
• S&P 500 -6.4% YTD
• Russell 2000 -9.6% YTD
• Nasdaq Composite -13.0% YTD