Stock Market Update

[BRIEFING.COM] The S&P 500 settled a whisker shy of 5,700, down nearly ten points (-0.2%) from yesterday. The Nasdaq Composite settled flattish while the Dow Jones Industrial Average logged a 0.4% decline and the Russell 2000 fell 0.7%.

There was an element of hesitation in today's trade ahead of Friday's employment report, which may impact the market's thinking on the Fed's rate cut path. Today's negative bias also stemmed from geopolitical worries, which manifested in further upside action in oil prices.

WTI crude oil futures settled 5.0% higher at $73.73/bbl. This price action led the S&P 500 energy sector (+1.6%) to register the largest gain among the 11 sectors by a decent margin. 

Treasuries, which usually benefit from geopolitical tension as a safe-haven trade, closed with losses across the curve. The 10-yr yield settled seven basis points higher at 3.85% and the 2-yr yield settled seven basis points higher at 3.71%.  

The jump in yields was due in part to the release of the September ISM Non-Manufacturing Index, which beat expectations, but didn't change rate cut probabilities in front of the jobs report. The fed funds futures market sees a 65.4% probability of a 25 basis points cut at the November FOMC meeting, little changed from 64.8% yesterday and up from 50.7% one week ago, according to the CME FedWatch Tool. 

Semiconductor shares, led by NVIDIA (NVDA 122.85, +4.00, +3.4%), showed relative strength today after CEO Jensen Huang told CNBC in an interview after yesterday's close that demand for Blackwell is "insane." The PHLX Semiconductor Index (SOX) closed 0.5% higher and the S&P 500 information technology sector, which houses chipmaker constituents, closed 0.6% higher. 

The only other sector to close higher was communication services (+0.2%) thanks to a gain Meta Platforms (META 582.77, +9.96, +1.7%).

Five of the 11 sectors closed more than 0.9% lower. The consumer discretionary sector was the biggest laggard, dropping 1.3%.

• S&P 500: +19.5% YTD
• Nasdaq Composite: +19.4% YTD
• Dow Jones Industrial Average: +11.5% YTD
• S&P Midcap 400: +11.0% YTD
• Russell 2000: +7.6% YTD

Reviewing today's economic data:

• Weekly Initial Claims 225K (Briefing.com consensus 223K); Prior was revised to 219K from 218K, Weekly Continuing Claims 1.826 mln; Prior was revised to 1.827 mln from 1.834 mln
  • The key takeaway from the report is that initial jobless claims, a leading indicator, remain well below recession-like levels (the average of initial claims for the last five recessions, excluding the COVID recession, was 458,000), imparting an encouraging understanding that the labor market might be bending but it isn't breaking.
• September S&P Global US Services PMI - Final 55.2; Prior 55.7
• August Factory Orders -0.2% (Briefing.com consensus 0.1%); Prior was revised to 4.9% from 5.0%
  • The key takeaway from the report is that business spending rebounded in August.
• September ISM Non-Manufacturing Index 54.9% (Briefing.com consensus 51.6%); Prior 51.5%
  • The key takeaway from the report is that overall activity in the largest sector of the U.S. economy accelerated in September, albeit without an expansion in employment activity, as new orders increased along with prices. net-net, this is a report that meshes more with a soft landing outcome than a hard landing one.