Stock Market Update

[BRIEFING.COM] The stock market had a rather eventful session, with NVIDIA's (NVDA 207.03, +6.00, +2.98%) rally pushing the S&P 500 (flat), Nasdaq Composite (+0.6%), and DJIA (-0.2%) to record highs shortly after the open. After the market's initial move, the major averages spent much of the session in a sideways drift leading into the FOMC decision this afternoon. 

The decision to cut the federal funds rate by 25 basis points to 3.75%-4.00% was widely expected and had little effect on the major averages. Fed Chair Powell's comments on the path for additional easing, however, prompted a sharp slide. 

In particular, Mr. Powell noted that committee members hold differing views regarding another rate cut at the December meeting, saying, "A further reduction in policy rate in December is not a foregone conclusion, far from it."

The CME FedWatch tool now assigns a 65.9% probability to at least a 25-basis-point rate cut at the December 10 FOMC meeting, down from 90.9% yesterday.

The comments saw several S&P 500 sectors and the major averages move beneath their baselines in response. The tech-heavy Nasdaq Composite rebounded and notched a record closing high, while the S&P 500 and DJIA failed to close above their baselines. 

With much of the morning headline buzz centered around NVIDIA surpassing $5 trillion in market capitalization, it is not surprising that the information technology sector (+1.1%) finished as one of the best-performing S&P 500 sectors. 

NVIDIA's strength also helped the PHLX Semiconductor Index finish 1.9% higher. 

Elsewhere in the sector, Teradyne (TER 173.94, +29.56, +20.47%) and Seagate Tech (STX 265.62, +42.62, +19.11%) captured impressive gains after beating earnings expectations, with Western Digital (WDC 141.38, +16.46, +13.18%) trading higher in sympathy. 

The communications services sector (+1.1%) finished with an identical gain, supported by a solid showing from Alphabet (GOOG 275.17, +6.74, +2.51%), which reports its earnings after the close. 

Mega-caps once again provided an outsized contribution to the major averages, with the market-weighted S&P 500 (flat) decidedly outperforming the S&P 500 Equal Weighted Index (-1.1%). 

Meta Platforms (META 751.67, +0.23, +0.03%) and Microsoft (MSFT 541.55, -0.52, -0.10%) are also set to report earnings after the close. 

Elsewhere, the energy sector (+0.8%) captured a gain as crude oil futures settled today's session $0.30 higher (+0.5%) at $60.46 per barrel. 

The industrials sector (+0.3%) captured a more modest gain, led by Caterpillar (CAT 585.78, +61.31, +11.69%) after a strong earnings beat. 

As for today's laggards, there were some significant losses across the six S&P 500 sectors that retreated. 

The real estate sector (-2.7%) widened its week-to-date loss as all but one of its components traded lower, while the consumer staples sector (-2.0%) saw every one of its constituents finish with a loss. 

Meanwhile, the financials sector (-1.7%) faced pressure from Fiserv (FI 70.73, -55.44, -43.94%) after the company missed earnings expectations and slashed guidance, while an earnings miss from Smurfit Westrock plc (SW 37.84, -5.26, -12.20%) pushed the materials sector (-1.8%) lower. 

Smaller-cap indices were also among today's laggards. The small-cap Russell 2000 (-0.9%) retreated sharply from record-high levels of its own following Fed Chair Powell's somewhat hawkish comments on a December rate cut. The S&P Mid Cap 400 (-0.7%) faced a similar loss.

Ultimately, today's action demonstrated continued momentum in the AI trade and, in particular, the meteoric ascent of the market's largest company, NVIDIA. There were, however, some considerable pockets of weakness in the broader market, with softened expectations for further monetary policy easing providing an additional headwind to overlooked segments. 

U.S. Treasuries also faced pressure in response to the market's reassessment of the Fed's policy path. The 2-year note yield settled up nine basis points to 3.58%, and the 10-year note yield settled up eight basis points to 4.06%.

• Nasdaq Composite: +24.1% YTD
• S&P 500: + 17.2% YTD
• DJIA: +12.0% YTD
• Russell 2000: +11.4% YTD
• S&P Mid Cap 400: +4.4% YTD

Reviewing today's data:

• Pending Home Sales were unchanged in September (Briefing.com consensus 1.2%) after increasing 4.2% (revised from 4.0%) in August.
• The weekly MBA Mortgage Index rose 7.1% after decreasing 0.3% a week ago. The Purchase Index was up 4.5% while the Refinance Index rose 9.3%.