Stock Market Update

[BRIEFING.COM] The major indices closed in mixed fashion near their highs of the day, yet the underlying market was quite a bit weaker than index level performance suggested. Growth concerns sparked some flight to safety buying interest in the mega cap stocks, which drove a lot of the index level action. 

Alphabet (GOOG 116.90, +4.62, +4.1%) continued to rally after its Developers Conference yesterday, logging some of the biggest gains for the mega caps. Amazon.com (AMZN 112.18, +1.99, +1.8%), Meta Platforms (META 235.79, +2.71, +1.2%), and Tesla (TSLA 172.08, +3.54, +2.1%) all rose more than 1.0% today while Apple (AAPL 173.75, +0.19, +0.1%) closed with a slim gain. The Vanguard Mega Cap Growth ETF (MGK) rose 0.2%. Coincidentally, the Nasdaq Composite also gained 0.2% while the Nasdaq 100 gained 0.3%.

The Invesco S&P 500 Equal Weight ETF (RSP), though, fell 0.5% today. Decliners led advancers by a greater than 2-to-1 margin at the NYSE and a slightly less than 2-to-1 margin at the Nasdaq.

A sizable loss in Disney (DIS 92.31, -8.83, -8.7%) weighed on general sentiment today, leading the Dow Jones Industrial Average to underperform the other major indices. Disney reported fiscal Q2 results that featured a 2% year-over-year decline in Disney+ paid subscribers.

In addition to growth concerns and disappointing results from Disney, uncertainty about the debt ceiling and ongoing pressure on regional bank stocks loomed over the broader market. PacWest (PACW 4.70, -1.38, -22.7%) saw another sharp decline today after the company said its deposits declined approximately 9.5% for the week ending May 5. The SPDR S&P Regional Bank ETF (KRE) fell 2.5% and the SPDR S&P Bank ETF (KBE) fell 1.6%.

Most of the S&P 500 sectors closed with losses while the communication services (+1.7%) and consumer discretionary (+0.6%) sectors led the outperformers thanks to gains in their respective mega cap components.

Market participants were also digesting some economic data that was relatively pleasing with respect to the monetary policy outlook. The April Producer Price Index showed a moderation in inflation at the wholesale level while weekly initial jobless claims hit their highest level since October 30, 2021. Those readings effectively went the market's way, which is to say each moved in a direction that should leave the FOMC inclined to hold rates steady when it meets again in June.

The 2-yr note yield traded as low as 3.80% following the data, but settled the day unchanged at 3.90%. The 10-yr note yield, at 3.34% shortly after the data, fell four basis points to 3.40%.

Separately, the Bank of England raised its key lending rate by 25 basis points to 4.50%, as expected.

• Nasdaq Composite: +17.8% YTD
• S&P 500: +7.6% YTD
• Dow Jones Industrial Average: +0.5% YTD
• S&P Midcap 400: +0.1% YTD
• Russell 2000: -0.9% YTD

Reviewing today's economic data:

• April PPI 0.2% (Briefing.com consensus 0.3%); Prior was revised to -0.4% from -0.5%; April Core PPI 0.2% (Briefing.com consensus 0.3%); Prior was revised to 0.0% from -0.1%
  • The key takeaway from the report is that producer inflation continued to moderate. On a year-over-year basis, total PPI was up 2.3% versus up 2.7% in March. Excluding food and energy, PPI was up 3.2% versus 3.4% in March.
• Weekly Initial Claims 264K (Briefing.com consensus 247K); Prior 242K; Weekly Continuing Claims 1.813 mln; Prior was revised to 1.801 mln from 1.805 mln
  • The key takeaway from the report is that initial claims reached their highest level since October 30, 2021, tracking in a direction that reflects a labor market that is becoming less tight.

Looking ahead to Friday, market participants will receive the following economic data:

• 8:30 ET: April Import Prices (prior -0.6%), Import Prices ex-oil (prior -0.5%), Export Prices (prior -0.3%), and Export Prices ex-agriculture (prior -0.2%)
• 10:00 ET: Preliminary May University of Michigan Consumer Sentiment survey (Briefing.com consensus 62.9; prior 63.5)