Stock Market Update

[BRIEFING.COM] The stock market delivered an eventful session, with cyclical and defensive names extending yesterday’s rate-cut momentum to lift the DJIA (+1.3%) to a record high. At the same time, weakness in tech and other mega-cap names following Oracle’s (ORCL 198.64, -24.37, -10.93%) disappointing results kept the S&P 500 (+0.2%) and Nasdaq Composite (-0.3%) subdued, though the S&P 500 still managed to log a record close. 

The smaller-cap Russell 2000 (+1.2%) and S&P Mid Cap 400 (+1.0%) continued on their run of recent outperformance as the Fed's rate cut and softer policy tone encouraged renewed interest in domestically focused, rate-sensitive names.

The information technology sector (-0.6%) spent the majority of the session as the biggest laggard, as Oracle's revenue miss and lighter-than-expected free cash flow weighed on other mega-cap names across the AI trade. 

NVIDIA (NVDA 180.96, -2.82, -1.53%) finished lower, with the broader PHLX Semiconductor Index closing with a 0.8% loss. Broadcom (AVGO 406.96, -6.01, -1.46%) also traded lower ahead of its earnings report this afternoon, which investors will look to for a boost in AI sentiment. 

While big tech certainly limited gains at the index level, it is worth noting that the information technology sector mounted an impressive intraday move after trading over 2.0% lower this morning, a move that was pivotal in getting the S&P 500 across its flatline and notching a record close. 

The communication services sector (-1.0%) finished with the widest loss, as Alphabet (GOOG 313.75, -7.25, -2.26%) was burdened by today's mega-cap weakness, without a comeback effort this afternoon.

Dow component Walt Disney (DIS 111.48, +2.64, +2.43%) still notched a solid gain after news that the company struck a licensing deal with OpenAI that will allow some 200 Disney characters to be used in the company's short-form generative AI video platform, Sora. As part of the agreement, Disney will also be investing $1 billion in OpenAI. 

The Vanguard Mega Cap Growth ETF finished 0.3% lower, contributing to the underperformance of the market-weighted S&P 500 (+0.2%) relative to the S&P 500 Equal Weighted Index (+0.8%).

Meanwhile, the energy sector (-0.4%) finished with a more modest loss as crude oil futures settled today's session $0.92 lower (-1.6%) at $57.61 per barrel.

While weakness in mega-cap tech names certainly stifled growth in the S&P 500 and Nasdaq Composite, the broader market put up another solid performance in the wake of yesterday's FOMC meeting. 

Cyclical sectors, such as the materials (+2.2%) and financials (+1.8%) sectors, outperformed again as investors rotated into sectors that benefit from a more accommodative monetary policy backdrop.

Mosaic (MOS 25.20, +1.44, +6.08%) captured one of the widest gains across S&P 500 names after reports that a Ukrainian drone strike caused a large fire at a prominent Russian mineral fertilizer plant. 

Visa (V 345.65, +19.92, +6.12%) notched a similar gain, catching an upgrade from Bank of America Securities to Buy from Neutral this morning. 

The defensive health care (+1.0%), utilities (+0.7%), and consumer staples (+0.7%) sectors also caught a solid rotational bid today amid the weakness in tech names. 

Managed care names such as Elevance Health (ELV 360.18, +19.14, +5.61%), Centene (CNC 40.47, +1.80, +4.65%), and Molina Healthcare (MOH 166.94, +6.42, +4.00%) traded sharply higher following headlines that a Republican-backed healthcare plan to redirect Affordable Care Act subsidies from insurance companies to Americans failed by a Senate vote of 51-48.

Eli Lilly (LLY 1009.14, +15.50, +1.56%) also notched a solid gain after announcing positive topline results from its Phase 3 TRIUMPH-4 clinical trial evaluating the weight-loss effects of retatrutide, its investigational "triple G" agonist.

Attention now shifts to Broadcom's earnings, which could influence the tone around chipmakers and AI, while the post-FOMC rotation into cyclicals and defensives continues to shape the market's underlying strength.

U.S. Treasuries extended their midweek bounce on Thursday, though the advance found some intraday resistance, which left yields on 5-year and longer tenors above their opening levels. The 2-year note yield settled down four basis points to 3.53%, and the 10-year note yield settled down two basis points to 4.14%.

• Nasdaq Composite: +22.2% YTD
• S&P 500: +17.3% YTD
• Russell 2000: +16.2% YTD
• DJIA: +14.5% YTD
• S&P Mid Cap 400: +8.8% YTD

Reviewing today's data:

• Weekly Initial Claims 236K; Prior was revised to 192K from 191K, Weekly Continuing Claims 1.838 mln; Prior was revised to 1.937 mln from 1.939 mln
  • The key takeaway from the report is that, on balance, it doesn't point to a material weakening in the labor market.
• September Trade Balance -$52.8 bln (Briefing.com consensus -$61.7 bln); Prior was revised to -$59.3 bln from -$59.6 bln
  • The key takeaway from the report is that the narrower deficit was the byproduct of exports being $8.4 billion more than August exports and imports being $1.9 billion more than August imports.
• September Wholesale Inventories 0.5% (Briefing.com consensus -0.2%); Prior -0.1%