Stock Market Update

[BRIEFING.COM] The major indices have been in and out of negative territory today, but true to recent form they have been resilient to selling interest and have ridden the coattails of mega-cap leadership. They have also drawn some energy from a wave of stimulus measures announced in China.

Specifically, 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.

That news fueled a massive 4.2% gain in China's Shanghai Composite, which has carried over to Chinese ADRs listed in the U.S., and has manifested itself in the outperformance of related ETFs, such as the iShares China Large-Cap ETF (FXI 29.99, +2.31, +8.3%), as well as the S&P 500 materials sector (+1.2%).

The latter is benefitting nicely from an expectation that the stimulus plans will help ignite a Chinese economy that is a huge consumer of raw materials. Fittingly, Freeport McMoRan (FCX 48.51, +3.37, +7.5%), a producer of gold and copper, is today's best-performing S&P 500 component.

Next in line are a number of other companies that operate in China, such as Las Vegas Sands (LVS 44.45, +2.32, +5.5%), Estee Lauder (EL 91.00, +4.30, +4.9%), and Wynn Resorts (WYNN 83.49, +3.28, +4.1%).

These stocks have helped underpin the broader market, but it is NVIDIA (NVDA 120.95, +4.69, +4.0%) that has been instrumental in keeping the market-cap weighted Nasdaq Composite and S&P 500 elevated in positive territory. It is up 4.5% from a morning low that took it below its 50-day moving average (115.73), rebounding without a specific news catalyst. The Philadelphia Semiconductor Index is up 1.5%.

The buy-the-dip interest on the violation of that key short-term support level helped steady a market that was wavering following a disappointing Consumer Confidence Report for September that featured the largest decline in confidence since August 2021 and declines in both the present situation and expectations indices.

Separately, there hasn't been much buy-the-dip interest yet in the S&P 500 financials sector (-1.1%). It is near its lows for the session and standing out as today's worst-performing area, pressured by weakness in the bank stocks. The SPDR S&P Bank ETF (KBE) is down 1.2% while the SPDR S&P Regional Banking ETF (KRE) is down 1.3%.

The 2-yr note yield, at 3.59% just before the 10:00 a.m. ET releases of the Consumer Confidence Report, is at 3.55%, down three basis points from yesterday's settlement. The 10-yr note yield, at 3.79% just before the release, has dropped to 3.74%, unchanged from yesterday's settlement.

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.