Stock Market Update

[BRIEFING.COM] The stock market is in rally-mode again today following a cooler-than-expected Consumer Price Index for June. Advancers have an 11-to-2 lead over decliners at the NYSE and a 3-to-1 lead at the Nasdaq.

It doesn't look like a market rally at the index-level, however, due to losses in mega cap and semiconductor-related names. The S&P 500 (-0.8%) and Nasdaq Composite (-1.5%) trade near their worst levels of the day.

The weightiest stocks in the S&P 500 like NVIDIA (NVDA 129.37, -5.50, -4.1%), Microsoft (MSFT 453.92, -12.23, -2.6%), Amazon.com (AMZN 194.93, -4.86, -2.1%), Meta Platforms (META 515.05, -19.64, -3.7%), and Apple (AAPL 227.77, -5.23, -2.3%) show some of the steepest losses today. 

This price action is due to a rotation away from names that have outperformed in recent sessions and all year.

Tesla (TSLA 247.83, -16.57, -6.3%) is another influential laggard after a sharp reversal on news that it's delaying its robotaxi plans until October, according to Bloomberg. The stock had been trading nearly 3% higher at its best level of the day.

Market participants are reacting to a CPI report that supported the market's optimistic rate cut view and send market rates sharply lower.

The 10-yr note yield, which is most reactive to inflation expectations, dropped 11 basis points to 4.17%. The 2-yr note yield, which is most responsive to changes in the fed fund rate, dropped 13 basis points to 4.50%.

The activity in Treasuries has acted as support for equities, especially rate-sensitive areas of the market. The real estate sector is the top performing S&P 500 sector by a wide margin, showing a 2.5% gain.

Homebuilder stocks are also benefitting from the drop in rates. Lower rates would drive mortgage rates down from elevated levels, which has been a headwind for the industry. iShares US Home Construction ETF (ITB) shows a 5.5% gain and the SPDR S&P Homebuilder ETF (XHB) sports a 5.4% gain.

Separately, Airline stocks are underperforming the broader market in sympathy with Delta Air Lines (DAL 44.29, -2.57, -5.5%), which reported below-consensus earnings and guidance. The US Global JETS ETF (JETS) shows a 1.5% decline.

Reviewing today's economic data:

• Weekly Initial Claims 222K (Briefing.com consensus 234K); Prior was revised to 239K from 238K; Weekly Continuing Claims 1.852 mln; Prior was revised to 1.856 mln from 1.858 mln
  • The key takeaway from the report is that initial claims continued backtracking from a high that was reached in June, suggesting that the labor market is holding up well despite restrictive policy from the Fed.
• June CPI -0.1% (Briefing.com consensus 0.1%); Prior 0.0%; June Core CPI 0.1% (Briefing.com consensus 0.2%); Prior 0.2%
  • The key takeaway from the report is that the market heard exactly what it hoped for, as CPI deflated slightly in June, contributing to additional disinflation on a year-over-year basis. The 3.0% year-over-year growth rate matched the low from 2023, which will be seen as supportive of a case for a rate cut from the FOMC.