Stock Market Update

[BRIEFING.COM] The S&P 500 and Nasdaq Composite are moving further into record territory today while the Dow Jones Industrial Average and Russell 2000 trade lower.

Market participants are reacting to the June Employment Situation Report, which went the market's way in terms of rate cut expectations. The report also stoked some concerns about lower earnings growth in the event that softening labor market conditions translates into lower consumer spending. 

Private sector payrolls were up just 136,000, average hourly earnings growth decelerated to 3.9% (from 4.1%) on a year-over-year basis, the unemployment rate pushed up to 4.1% from 4.0%, and persons unemployed for 27 weeks or more accounted for 22.2% of the unemployed versus 20.7% in May, suggesting it has gotten harder to find a new job quickly.

Rate cut expectations moved up in response to the data. The likelihood of a 25-basis points rate cut at the September FOMC meeting moved to 75.7% from 64.1% one week ago, according to the CME FedWatch Tool.

Treasury yields turned lower in response to the jobs report, reflecting increased rate cut expectations. The drop in rates hasn't translated into support for equities, though, due to the worries about earnings growth. The 2-yr note yield is down 10 basis points to 4.62% and the 10-yr note yield is down eight basis points to 4.28%.

Many stocks are trading lower as evidenced by a 0.4% decline in the Invesco S&P 500 Equal Weight ETF (RSP). Outperforming mega cap stocks have boosted the S&P 500 and Nasdaq, leading the Vanguard Mega Cap Growth ETF (MGK) to trade 1.1% higher.

Meta Platforms (META 531.78, +21.87, +4.4%), Apple (AAPL 225.09, +3.54, +1.6%), and Microsoft (MSFT 466.90, +6.16, +1.3%) are among the influential winners today.

Macy's (M 19.55, +1.62, +9.0%) is another winning standout after after Arkhouse Management and Brigade Capital Management upped their bid to take the department store chain private. Other names with a high exposure to discretionary spending are lagging the broader market.

Homebuilders, entertainment-related names, and cruise line shares are some of the weakest performing stocks in the S&P 500 consumer discretionary sector (+0.5%). The sector is still trading higher today thanks in part to a gain Amazon.com (AMZN 200.29, +2.70, +1.4%).

The underperformance of some discretionary-related names is a manifestation of concerns about lower earnings growth prospects that were stirred by this morning's data.

Reviewing today's economic data:

• June Nonfarm Payrolls 206K (Briefing.com consensus 185K); Prior was revised to 218K from 272K; June Nonfarm Private Payrolls 136K (Briefing.com consensus 160K); Prior was revised to 193K from 229K; June Avg. Hourly Earnings 0.3% (Briefing.com consensus 0.3%); Prior 0.4%; June Unemployment Rate 4.1% (Briefing.com consensus 4.0%); Prior 4.0%; June Average Workweek 34.3 (Briefing.com consensus 34.3); Prior 34.3
  • The key takeaway from the report is that labor market conditions are softening, which will provide the Fed some cover to cut rates in September if it so chooses.