Stock Market Update

[BRIEFING.COM] Stocks hit some turbulence, though, in response to the latest move by the Fed.

The FOMC left the target range for the fed funds rate unchanged at 5.25-5.50%, as expected. The vote was unanimous, as expected. The directive reiterated that, "The Committee does not expect it will be appropriate to reduce the target range until it has greater confidence that inflation is moving sustainably toward 2 percent," as expected.

If there was a surprise, it would be the Summary of Economic Projections (SEP), which showed a median estimate of only one rate cut this year versus three at the time of the March projections.

The market vacillated in the wake of the policy directive and SEP, and Fed Chair Powell's press conference, which featured a Fed Chair who was non-committal about the policy path. Ultimately, the S&P 500 (+0.9%) and Nasdaq Composite (+1.5%) settled further into record territory. The Dow Jones Industrial Average (-0.1%) settled slightly lower after the late-session choppiness.

The Treasury market also exhibited volatile action in response to the afternoon developments, ultimately settling with solid gains. The 10-yr note yield fell 11 basis points to 4.30% and the 2-yr note yield, which is most sensitive to changes in the fed funds rate, fell eight basis points to 4.75%. 

The fed funds futures market is now pricing in a 63.3% probability of a 25 basis points rate cut at the September FOMC meeting versus a 52.8% probability yesterday.

Many stocks participated in today's gains, leading the equal-weighted S&P 500 to close 0.5% higher and seven of the 11 S&P 500 sectors to close with gains. The weightiest sector in the index -- information technology -- logged the biggest gain as some influential components reached fresh highs. 

Apple (AAPL 213.07, +5.92, +2.9%), NVIDIA (NVDA 125.20, +4.29, +3.6%), and Microsoft (MSFT 441.06, +8.38, +1.9%) were standouts in that respect, but the top performing sector component was Oracle (ORCL 140.38, +16.50, +13.3%), which jumped 13% on quarterly results and guidance.

• Nasdaq Composite: +17.3% YTD
• S&P 500:+13.7% YTD
• S&P Midcap 400: +6.1% YTD
• Dow Jones Industrial Average: +2.7% YTD
• Russell 2000: +1.5% YTD

Reviewing today's economic data:

• Weekly MBA Mortgage Applications Index 15.6%; Prior -5.2%
• May CPI 0.0% (Briefing.com consensus 0.1%); Prior 0.3%; May Core CPI 0.2% (Briefing.com consensus 0.3%); Prior 0.3%
  • The key takeaway from the report is the recognition that there was year-over-year disinflation, meaning prices moved in the Fed's desired direction. Accordingly, the market will conclude that there won't be another rate hike and will remain hopeful that a rate cut could come as early as September.

Thursday's economic calendar features:

• 8:30 ET: May PPI (Briefing.com consensus 0.1%; prior 0.5%), Core PPI (Briefing.com consensus 0.3%; prior 0.5%), Weekly Initial Claims (Briefing.com consensus 224,000; prior 229,000), and Continuing Claims (prior 1.792 mln)
• 10:30 ET: Weekly natural gas inventories (prior 98 bcf)