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Briefing.com Summary:
*Oil prices and Treasury yields are higher this morning, with some inflation concerns in the mix.
*Semiconductor stocks continue to exhibit relative and absolute strength.
*The ADP Employment Change Report for May brought some good change.
So, oil prices are higher in the wake of reports that the U.S. and Iran have traded military strikes; Treasury yields are higher, in part because of the higher oil prices; and the U.S. Trade Representative has proposed an added tariff of 10.0% to 12.5% for as many as 60 countries, including China, Japan, and those in the European Union, found to have used forced labor to make goods for export.
That's not a great headline backdrop, yet the equity futures market has given only a token nod to any of that.
Currently, the S&P 500 futures are down 17 points and are trading 0.2% below fair value, the Nasdaq 100 futures are up 12 points and are trading fractionally above fair value, and the Dow Jones Industrial Average futures are down 228 points and are trading 0.4% below fair value.
The VanEck Semiconductor ETF (SMH), however, is up 1.2% in pre-market trading, so the stock market playground isn't closed entirely. We'll just have to see if those stocks are called back into class or continue to get some extended recess time.
For now, it feels like a Hump Day in school—the drudgery of knowing there are three full days to get through before the weekend, but also the tinge of excitement that the weekend is closer than it was two days ago.
Palo Alto Networks (PANW), Ulta Beauty (ULTA), Macy's (M), and Medtronic (MDT) provided some earnings reporting excitement. That doesn't mean their stocks are all trading higher, but for what it is worth, they all exceeded their consensus EPS estimates.
The ADP Employment Change Report for May also created some buzz, as it was a fairly solid report. Private sector employment increased by 122,000 (Briefing.com consensus: 110,000) following a downwardly revised 105,000 (from 109,000) in April.
The job gains were concentrated mostly in the service-providing sector (114,000), and they occurred across all business sizes, led by small establishments (67,000).
This report is a nice precursor to Friday's more comprehensive Employment Situation Report, and it is also another reminder why the Fed isn't expected to cut the target range for the fed funds rate anytime soon.
The 2-yr note yield is up four basis points to 4.09%, and the 10-yr note yield is up four basis points to 4.49%. Perhaps a move above 4.50% today will create a headwind for stocks. Then again, we have been there before (and even higher), and the indices have continued to benefit from a tailwind, sending them to record highs.
The AI trade and the impressive earnings growth have been the overriding drivers, so we'll see soon enough if they can keep driving or need a break at a rest stop.
