Stock Market Update

[BRIEFING.COM] The S&P 500 jumped 1.6% and the Nasdaq Composite logged a 2.6% gain while the Dow Jones Industrial Average (+0.2%) and Russell 2000 (+0.5%) settled with smaller gains.

The FOMC decision and Fed Chair Powell's press conference initially drew in additional buying interest in the stock market, but gains faded slightly ahead of the close. The major indices settled with solid gains, little changed from levels seen before the 2:00 p.m. ET policy directive and 2:30 p.m. ET press conference. 

The FOMC voted unanimously to leave the target range for the fed funds rate unchanged at 5.25-5.50%, as expected. The Fed is looking at things in more balanced manner, though, compared to prior meetings. That is, it is not overweighting the inflation side of its mandate like it had been. That is a nuanced transition that is in-line with the comments heard from various Fed officials leading up to today's decision.

Fed Chair Powell's press conference was also largely what the market expected to hear. He didn't pre-commit the FOMC to cutting rates at the September meeting, although he suggested more than once that the discussion of a rate cut would be on the table if the Fed gets the data it hopes it will get.

Treasuries had a somewhat muted response. The 10-yr note yield fell three basis to 4.11% and the 2-yr note yield declined two basis points to 4.34%.

The positive bias today was driven by strength in the semiconductor space and mega cap stocks through the entire session. NVIDIA (NVDA 117.02, +13.29, +12.8%) was a top performer from the space. The PHLX Semiconductor Index (SOX) jumped 7.0%. This price action overshadowed an earnings-related loss in Microsoft (MSFT 418.35, -4.57, -1.1%).

The strength in semiconductor shares was in response to earnings news from AMD (AMD 144.48, +6.04, +4.4%), Microsoft's robust capex budget, and talk that some foreign companies could be exempt from export restrictions to China.

Dow component Boeing (BA 190.60, +3.74, +2.0%) was another standout after reporting earnings.

• Nasdaq Composite:+17.2% YTD
• S&P 500: +15.8% YTD
• Russell 2000: +11.2% YTD
• S&P Midcap 400: +11.4% YTD
• Dow Jones Industrial Average: +8.4% YTD

Reviewing today's economic data:

• Weekly MBA Mortgage Applications Index -3.9%; Prior -2.2%
• July ADP Employment Change 122K (Briefing.com consensus 160K); Prior was revised to 155K from 150K
• Q2 Employment Cost Index 0.9% (Briefing.com consensus 1.0%); Prior 1.2%
  • The key takeaway is that there was a year-over-year moderation in wages and salaries and benefit costs that, again, trended in the right manner to suggest the Fed might be convinced to cut rates in September.
• June Pending Home Sales 4.8% (Briefing.com consensus 1.5%); Prior was revised to -1.9% from -2.1%
• July Chicago PMI 45.3; Prior 47.4

Looking ahead, Thursday's economic lineup features:

• 8:30 ET: Weekly Initial Claims (Briefing.com consensus 233,000; prior 235,000), Continuing Claims (prior 1.851 mln), preliminary Q2 Productivity (Briefing.com consensus 1.6%; prior 0.2%), and preliminary Q2 Unit Labor Costs (Briefing.com consensus 1.7%; prior 4.0%)
• 10:00 ET: June Construction Spending (Briefing.com consensus 0.1%; prior -0.1%) and July ISM Manufacturing (Briefing.com consensus 48.5%; prior 48.5%)
• 10:30 ET: Weekly natural gas inventories (prior +22 bcf)