Page One
The stock market did just enough Monday to keep selling efforts in check. The mega-cap stocks and the semiconductor stocks were noticeably weak in early action, yet the the Dow Jones Industrial Average galloped to a new record high and the broader market did not come unglued.
The broader market was supported by the relative strength of many other stocks in the face of the weakness in the mega-cap stocks and semiconductor stocks. It was supported as well by visions of a 50-basis points rate at Wednesday's FOMC meeting.
By the close, the mega-cap stocks and semiconductor stocks had pared their losses and the equal-weighted S&P 500 and Russell 2000 had glided into today's session with 0.7% and 0.3% gains, respectively. The indices remain on that glide path.
Currently, the S&P 500 futures are up 25 points and are trading 0.5% above fair value, the Nasdaq 100 futures are up 130 points and are trading 0.6% above fair value, and the Dow Jones Industrial Average futures are up 135 points and are trading 0.3% above fair value.
Microsoft (MSFT) helped infuse this positive disposition with news of a 10% increase to its quarterly dividend and a share buyback authorization up to $60 billion. There was also a buzz surrounding Intel's (INTC) announcements of a major new collaboration with Amazon Web Services to produce a new AI chip and a plan to turn its foundry business into a subsidiary.
These items energized the tech sector, and when the tech sector is energized the major indices tend to have a positive charge.
That charge was held after the release of the August Retail Sales report at 8:30 a.m. ET.
Total retail sales increased 0.1% month-over-month in August (Briefing.com consensus -0.2%) following an upwardly revised 1.1% (from 1.0%) in July. Excluding autos, retail sales were also up 0.1% (Briefing.com consensus 0.2%) following an unrevised 0.4% increase in July.
The key takeaway from the report is that control group sales -- the component that factors into GDP -- were up a sturdy 0.3% following an upwardly revised 0.4% increase (from 0.3%) in July and 0.9% increase in June. There is no hard landing in those numbers.
More to the point this week, the Fed may not see a basis for a 50-basis points rate cut in those numbers either. A rate cut is coming, however, and that idea seemingly continues to sit well in the market's mind, because that rate cut, no matter the size, is also expected to be the start of a series of rate cuts.
The 2-yr note yield, at 3.56% in front of the release, is at 3.59% now, up three basis points from yesterday's settlement. The 10-yr note yield, at 3.60% in front of the release, is at 3.63% now, up one basis point from yesterday's settlement.
The fed funds futures market for its part continues to favor the larger rate cut. According to the CME FedWatch Tool, the probability of a 50-basis points rate cut sits at 67% versus 62% yesterday (and 65% just before the release).
