Stock Market Update

[BRIEFING.COM] The stock market has responded strongly to the aggressive rate cut by the Fed yesterday. The S&P 500 (+1.9%) and Dow Jones Industrial Average (+1.4%) trade at all-time highs and the Nasdaq Composite sports a 2.9% gain.

The upside moves reflect a belief that the economy is in good shape and the Fed will cut rates as needed to maintain a solid economic backdrop. This morning's data supported this optimistic view. 

Weekly jobless claims remain steady below recession-like levels, the Philadelphia Fed Index tipped back into expansion (i.e. above 0.0 reading) in September, and existing home sales were in-line with expectations in August. 

The strong buying activity in equities also reflects a fear of missing out on further gains, boosted by strength in mega caps and chipmakers. The Vanguard Mega Cap Growth ETF (MGK) shows a 5.3% gain and the PHLX Semiconductor Index sports a 2.8% gain.

Apple (AAPL 229.14, +8.44, +3.8%), which trades up after T-Mobile's (TMUS 200.19, +3.51, +1.8%) CEO indicated iPhone 16 sales in the first week were better than last year's models, is a winning standout from the space. 

Strength in mega caps and chipmakers has propelled the information technology sector (+3.5%) to the top of the leaderboard by a decent margin. Seven of the S&P 500 sectors are higher by at least 1.0%.

The 10-yr yield is up four basis points to 3.73% and the 2-yr yield is unchanged from yesterday at 3.60%.

Reviewing today's economic data:

• Weekly Initial Claims 219K (Briefing.com consensus 232K); Prior was revised to 231K from 230K, Weekly Continuing Claims 1.829 mln; Prior was revised to 1.843 mln from 1.850 mln
  • The key takeaway from the report is that there is nothing in the low initial claims reading that, as Fed Chair Powell might agree, suggests the likelihood of a recession, or downturn in the economy, is elevated.
• Q2 Current Account Balance -$266.8 bln; Prior was revised to -$241.0 bln from -$237.6 bln
• September Philadelphia Fed Index 1.7 (Briefing.com consensus 3.0); Prior -7.0
• August Existing Home Sales 3.86 mln (Briefing.com consensus 3.90 mln); Prior was revised to 3.96 mln from 3.95 mln
  • The key takeaway from the report is that more inventory is becoming available with mortgage rates dropping, yet it is still a tight market, evidenced by the ongoing increase in the median home price.
• August Leading Homes Sales -0.2% (Briefing.com consensus -0.3%); Prior -0.6%