Stock Market Update

[BRIEFING.COM] The major indices started today on a lower note and have yet to benefit from a buy-the-dip mentality as Treasury yields have remained elevated and mega-cap stocks have pivoted to a position of relative weakness.

The 2-yr note yield climbed as high as 4.07% and the 10-yr note yield briefly stretched above 4.25% before running into resistance. They currently sit at 4.06% and 4.22%, respectively, up modestly from yesterday's settlement levels but up big from where they stood when the Fed cut rates on September 18 and implied more rate cuts would be on the way.

The jump in yields can be attributed in part to a better growth outlook for the U.S. economy, yet a burgeoning contention that the jump in yields may be related to concerns about rising national debt levels and/or inflation heating up again have slowed the momentum of a richly-valued stock market that has priced in a lot of good news already.

The latter can help explain why good earnings news from a host of companies hasn't spurred a more concerted breakout effort -- that and the angst that is building in front of the November 5 election.

AT&T (T 22.35, +0.85, +4.0%) and Texas Instruments (TXN 201.84, +7.87, +4.1%) have been among the earnings-reporting winners today, yet others like Coca-Cola (KO 68.13, -1.32, -1.9%), Hilton (HLT 231.57, -6.56, -2.8%), Enphase Energy (ENPH 79.88, -12.36, -13.4%), and Seagate Technology (STX 103.88, -8.76, -7.8%) have fallen by the wayside after their reports.

Separately, McDonald's (MCD 298.79, -15.90, -5.1%) has been hit hard on reports of an E.coli outbreak, and Starbucks (SBUX 95.99, -0.83, -0.9%) has recoiled on a Q4 and FY24 profit warning that some analysts have said isn't all that surprising.

Their losses have weighed on the broader market, but it has been the selling activity in the mega-cap space that has been the biggest drag. The Vanguard Mega-Cap Growth ETF (MGK), up 0.6% over the first two trading sessions this week, is down 1.5% today. NVDIA (NVDA 139.25, -4.34, -3.0%) and Apple (AAPL 229.34, -6.52, -2.8%) are notable laggards. The latter has been undercut by some cautious comments from the TF International analyst regarding iPhone 16 demand.

Fittingly, the information technology (-1.6%), consumer discretionary (-1.6%), and communication services (-1.1%) sectors, which house mega-cap constituents, are today's worst-performing sectors. The best-performing sectors in a market that has seen broad-based selling interest are the real estate (+0.9%), utilities (+0.6%), and financial (+0.1%) sectors.

Market internals show decliners leading advancers by a roughly 3-to-1 margin at the NYSE and Nasdaq.

Reviewing today's economic data:

• Existing home sales decreased 1.0% month-over-month in September to a seasonally adjusted annual rate of 3.84 million (Briefing.com consensus 3.90 million) from an upwardly revised 3.88 million (from 3.86 million) in August. Sales were down 3.5% from the same period a year ago.
  • The key takeaway from the report is that more inventory is becoming available, yet it is still a tight market, evidenced by the ongoing increase in the median home price and a very low mortgage delinquency rate.
• MBA Mortgage Applications Index -6.7% wk/wk with refinance applications -8% and purchase applications -5%