Stock Market Update

[BRIEFING.COM] The S&P 500 set a new record high today, bolstered by leadership from the semiconductor stocks following Micron's (MU 109.88, +14.11, +14.7%) better-than-expected earnings report and guidance, a tease from China that more policy stimulus is likely, and a reassuring initial jobless claims report.

While it was a record day for the S&P 500, it was a winning day all around for the other indices, which were supported by broad-based buying interest grounded in the view that global growth prospects should improve with the Fed, ECB, and People's Bank of China all moving toward more accommodative policy settings.

Other central banks are too, like the Swiss National Bank, which cut its key policy rate by 25 basis points today to 1.00% and suggested more cuts are likely to follow, and Mexico's central bank, which lowered its policy rate by 25 basis points to 10.50%.

The upbeat economic view was reflected today in the outperformance of the materials sector (+2.0%), the 3.6% increase in copper futures prices to $4.65/lb., the 3.5% jump in the Philadelphia Semiconductor Index, and Dow component Caterpillar's (CAT 391.16, +12.91, +3.4%) move to an all-time high. Shares of CAT are up 27.4% from their August 5 low.

Notwithstanding the positive economic vibes, oil prices continued to slide with OPEC+ saying it will proceed with planned oil output increases in December. WTI crude futures declined 3.0% to $67.68/bbl. The weaknkess in oil prices derailed the energy sector (-2.0%), which was today's weakest area.

Caterpillar's move helped underpin the industrials sector (+0.5%), which was also fortified by a big gain in Southwest Airlines (LUV 29.82, +1.43, +5.0%) after the discount carrier raised its Q3 RASM guidance and announced a $2.5 billion share repurchase program.

There was also some notable strength across the consumer discretionary stocks, only it was hard to see at the surface level for the consumer discretionary sector (+0.1%) because Amazon.com (AMZN 191.16, -1.37, -0.7%) and Tesla (TSLA 254.22, -2.80, -1.1%) were influential laggards. CarMax (KMX 78.18, +3.69, +5.0%), for instance, made a nice move after its earnings report.

Treasury yields did not make a nice move after today's economic data. They backed up in response to the understanding that initial jobless claims -- a leading indicator -- are nowhere near recession-like levels. The 2-yr note yield, at 3.53% before the 8:30 a.m. ET releases, settled at 3.62%, up seven basis points from yesterday's settlement. The 10-yr note yield, at 3.75% before the releases, settled at 3.79%, up one basis point from yesterday's settlement.

• Nasdaq Composite: +21.2%
• S&P 500: +20.5%
• S&P Midcap 400: +12.0%
• Dow Jones Industrial Average: +11.9%
• Russell 2000: +9.1%

Reviewing today's economic data:

• Initial jobless claims for the week ending September 21 decreased by 4,000 to 218,000 (Briefing.com consensus 224,000). Continuing jobless claims for the week ending September 14 increased by 13,000 to 1.834 million.
  • The key takeaway from the report is the continuing low level of initial jobless claims -- a leading indicator -- that isn't leading the market to think a recession is imminent.
• Durable goods orders were flat month-over-month in August (Briefing.com consensus -2.9%) following an unrevised 9.9% increase in July. Excluding transportation, durable goods orders were up 0.5% month-over-month (Briefing.com consensus 0.1%) following an upwardly revised 0.1% decline (from -0.2%) in July.
  • The key takeaway from the report is that new orders for nondefense capital goods excluding aircraft -- a proxy for business spending -- increased 0.2% month-over-month, bouncing back from a 0.2% decline in July.
• The third estimate for Q2 GDP remained at 3.0% (Briefing.com consensus 3.0%). Similarly, the third estimate for the Q2 GDP Deflator remained at 2.5% (Briefing.com consensus 2.5%).
  • The key takeaway from this backward-looking report (we're just days away from the end of the third quarter) is that personal spending (+2.8%) was nowhere near a recession glide path, having exceeded the prior eight quarter average of 2.2%.
• Pending home sales were up 0.6% in August (Briefing.com consensus 1.0%) versus -5.5% in July.

Looking ahead, Friday's economic calendar features:

• 08:30 ET: August Personal Income (Briefing.com consensus 0.4%; prior 0.3%), Personal Spending (Briefing.com consensus 0.3%; prior 0.5%), PCE Price Index (Briefing.com consensus 0.1%; prior 0.2%), and Core PCE Price Index (Briefing.com consensus 0.2%; prior 0.2%)
• 08:30 ET: August Adv. Intl. Trade in Goods (prior -$102.7 bln), August Adv. Retail Inventories (prior 0.8%), and August Adv. Wholesale Inventories (prior 0.3%)
• 10:00 ET: Final September University of Michigan Consumer Sentiment (Briefing.com consensus 69.0; prior 69.0)