Stock Market Update

[BRIEFING.COM] Today's trade started on a downbeat note after this morning's release of the August Consumer Price Index (CPI). The report stoked selling interest due to the understanding that core-CPI, which excludes food and energy, remained above the Fed's 2.0% target at 3.2% year-over-year. 

The S&P 500 was down as much as 1.6%, the Nasdaq Composite was down as much as 1.4%, the Russell 2000 was down as much as 1.9%, and the Dow Jones Industrial Average was down as much as 1.8%.

Stocks staged a turnaround, though, that left the major indices near session highs. The S&P 500 logged a 1.1% gain and the Nasdaq Composite rose 2.2%, propelled by strength in the semiconductor space and mega cap stocks. The Dow Jones Industrial Average and Russell 2000 logged slimmer gains.

This week's gains range from 1.3% to 4.2% in the three major indices. 

The recovery kicked into gear when the S&P 500 held above last Friday's low (5,402) on the initial retreat. The positive price action was helped by strength in NVIDIA (NVDA 116.91, +8.81, +8.2%), along with other semiconductor and mega cap shares.

The Vanguard Mega Cap Growth ETF (MGK) was up 2.1% and the PHLX Semiconductor Index (SOX) was up 4.9%.

Many stocks participated in the afternoon rally, leaving the equal-weighted S&P 500 0.1% higher and six S&P 500 sectors with gains. 

The information technology sector (+3.3%) was the best performer by a decent margin thanks to aforementioned gains. The consumer discretionary sector also showed strength, rising 1.3%.

The energy sector logged the biggest decline, down 0.9%, followed by the consumer staples sector (-0.9%).

Treasuries exhibited choppy action following the CPI report. The 2-yr note yield went from 3.55% to 3.69% and settled four basis points higher on the day at 3.65%. The 10-yr note yield went from 3.61% to 3.69% and settled one basis point higher on the day at 3.65%.

• S&P 500: +16.4% YTD
• Nasdaq Composite: +15.7% YTD
• Dow Jones Industrial Average: +8.4% YTD
• S&P Midcap 400: +6.4% YTD
• Russell 2000: +3.8% YTD

Reviewing today's economic data:

• Weekly MBA Mortgage Applications Index 1.4%; Prior 1.6%
• August CPI 0.2% (Briefing.com consensus 0.2%); Prior 0.2%, August Core CPI 0.3% (Briefing.com consensus 0.2%); Prior 0.2%
  • The key takeaway from the report is the understanding that core inflation is sticking stubbornly above the Fed's inflation goal of 2.0% which, to be fair, is oriented around the PCE Price Index. Still, the elevated core reading on a monthly and annual basis will be a focal point for the Fed and a likely reason to keep a September rate cut capped at 25 basis points.

Looking ahead, Thursday's economic lineup features:

• 8:30 ET: August PPI (Briefing.com consensus 0.2%; prior 0.1%), Core PPI (Briefing.com consensus 0.2%; prior 0.1%), weekly Initial Claims (Briefing.com consensus 229,000; prior 227,000), and Continuing Claims (prior 1.838 mln)
• 10:30 ET: Weekly natural gas inventories (prior +13 bcf)
• 14:00 ET: August Treasury Budget (prior -$243.7 bln)