Stock Market Update

[BRIEFING.COM] There might not have been a lot of buying conviction in today's market, but more importantly there was no real selling conviction either. There was some buy-the-dip interest that coursed through NVIDIA (NVDA 120.87, +4.61, +4.0%) and the mega-cap space; and there was also an appreciation for a wave of policy stimulus measures announced in China that coursed through the materials (+1.4%) and industrials (+0.7%) sectors.

The People's Bank of China said the 7-day reverse repurchase rate will be lowered by 20 basis points to 1.50%, the required reserve ratio will be cut by 50 basis points, the down payment requirement for second-home buyers will be reduced to 15% from 25%, and there will be a CNY800 bln ($113 bln) liquidity support facility for stocks.

China's Shanghai Composite surged 4.2% on the news. That move was the basis for the outsized move in Chinese ADRs, like Li Auto (LI 24.72, +2.52, +11.4%) and Alibaba (BABA 97.19, +7.10, +7.9%), and the hefty gain logged by the iShares China Large-Cap ETF (FXI 30.40, +2.72, +9.8%).

The hope that China's stimulus measures will succeed in providing a needed boost to the Chinese economy spilled over to the commodities market, which was also eyeing the formation of Hurricane Helene in the Gulf of Mexico and the heightened military conflict between Israel and Hezbollah. Copper futures jumped 3.0% to $4.49/lb while WTI crude futures increased 1.7% to $71.56/bbl.

Freeport McMoRan (FCX 48.72, +3.58, +7.9%), a leading gold and copper producer, was the best-performing S&P 500 component followed by Estee Lauder (EL 91.98, +5.28, +6.1%), Las Vegas Sands (LVS 44.38, +2.25, +5.3%), Wynn Resorts (WYNN 84.16, +3.96, +4.9%), and Caterpillar (CAT 385.93, +14.76, +4.0%), all of which would stand to benefit from a pickup in economic activity in China.

Their gains contributed to the relative strength seen in the consumer discretionary (+0.8%) and industrials (+0.7%) sectors. NVIDIA for its part was a big contributor to the strength seen in the Philadelphia Semiconductor Index (+1.3%) and the relative strength in the information technology sector (+0.8%).

NVIDIA found support after briefly trading below its 50-day moving average (115.73) this morning. On a related note, Barron's reported that CEO Jensen Huang completed a preplanned stock sale several months ahead of an anticipated schedule. Investors presumably liked the thought that his preplanned sale will no longer be an overhang on the stock.

There was an overhang on the financial sector (-0.9%) today. It lost ground, undercut by weakness in the bank stocks. The SPDR S&P Bank ETF (KBE) and SPDR S&P Regional Banking ETF (KRE) declined 1.3% and 1.4%, respectively.

Treasury yields also declined following a weaker-than-expected Consumer Confidence Report for September. The 2-yr note yield, at 3.59% just before the 10:00 a.m. ET release, settled today's session at 3.55%, down three basis points from yesterday's settlement. The 10-yr note yield, at 3.79% just before the release, finished unchanged at 3.74%. The Treasury market also digested a $69 billion 2-yr note action that saw the high yield match the when-issued yield of 3.52%.

• Nasdaq Composite: +20.4% YTD
• S&P 500: +20.2% YTD
• S&P Midcap 400: +12.1% YTD
• Dow Jones Industrial Average: +12.0% YTD
• Russell 2000: +9.7% YTD

Reviewing today's economic data:

• July FHFA Housing Price Index (actual 0.1%; prior 0.0%)
• July S&P Case-Shiller Home Price Index (actual 5.9%; Briefing.com consensus 6.0%; prior 6.5%).
• The Conference Board's Consumer Confidence Index fell to 98.7 in September (Briefing.com consensus 102.9) from an upwardly revised 105.6 (from 103.5) in August. September's decline was the largest since August 2021.
  • The key takeaway from the report is that consumers' views of the current labor market situation continued to soften and became more pessimistic about future labor market conditions -- a sentiment that could weigh on consumer spending activity.

Looking ahead, Wednesday's calendar features:

• 07:00 ET: MBA Mortgage Applications index (prior +14.2%)
• 10:00 ET: August New Home Sales (Briefing.com consensus 695K; prior 739K) 
• 10:30 ET: EIA crude Oil Inventories (prior -1.63M)
• 13:00 ET: $70 billion 5-yr note auction