Stock Market Update

[BRIEFING.COM] The S&P 500 (+0.8%), Nasdaq Composite (+1.4%), and DJIA (+0.1%) finished higher across the board as Micron's (MU 248.55, +23.03, +10.21%) earnings report gave the AI trade a nice lift, while the broader market was boosted by a cooler-than-expected November CPI report. 

The report was atypical, lacking month-over-month data because of missing October figures, but year-over-year inflation showed clear improvement, with CPI slowing to 2.7% from 3.0% and core CPI easing to 2.6% from 3.0%.

Ultimately it proved to be another pre-market boost for a market that was already trending up after a stellar beat-and-raise earnings report from Micron. The company shattered estimates for both revenue and earnings while providing a Q2 outlook that far exceeded market expectations.

Chipmakers unsurprisingly rallied on the report, with the PHLX Semiconductor Index gaining 2.5%. 

Additionally, the blowout results provided a significant lift to peer memory and storage stocks, including Sandisk (SNDK 219.46, +12.63, +6.11%), Seagate Tech (STX 292.00, +14.35, +5.17%), and Western Digital (WDC 175.01, +8.75, +5.26%). 

The information technology sector (+1.4%) finished with one of the widest gains as a result. 

The consumer discretionary sector (+1.8%) nabbed the top spot on the leaderboard, supported by solid leadership in its mega-cap components Tesla (TSLA 483.37, +16.11, +3.45%) and Amazon (AMZN 226.76, +5.49, +2.48%). 

Elsewhere in the sector, lululemon athletica (LULU 215.11, +7.24, +3.48%) traded higher after The Wall Street Journal reported that Elliot Investment Management has built a $1 billion stake in the company, and Starbucks (SBUX 89.42, +4.21, +4.94%) notched the widest gain in the sector as the company's "Back to Starbucks" plan is starting to yield results. 

The communication services sector (+1.5%) also benefitted from strength in the market's largest names. The Vanguard Mega Cap Growth ETF (+1.3%) captured a nice gain, helping the market-weighted S&P 500 (+0.8%) outperform the S&P 500 Equal Weighted Index (+0.2%). 

That margin was closer throughout most of the day, though some late-session selling activity saw five S&P 500 sectors close lower.  It is worth noting that all five sectors that closed lower today finished at or above their baselines in yesterday's action, highlighting the recent back-and-forth trend seen in the market. 

Additionally, only the energy sector (-1.4%) closed with a loss wider than 0.7%. 

Outside of the S&P 500, the Russell 2000 (+0.6%) and S&P Mid Cap 400 (+0.5%) followed the seesaw trend, notching solid gains after retreating yesterday. 

While the AI trade certainly showed signs of rejuvenation today, the broader trend is still reflective of some choppy action. The information technology sector (+1.4%), the PHLX Semiconductor Index (+2.5%), and the Vanguard Mega Cap Growth ETF (+1.3%) all outperformed today, but recent weakness still seats them week-to-date and month-to-date losses. 

Additionally, CNBC reported that, according to Goldman, more than $7.1 trillion in notional options exposure is scheduled to expire this Friday, including about $5 trillion linked to the S&P 500, which could make for a volatile end to this week's action.

Still, the S&P 500 notched a technical victory by reclaiming its 50-day moving average (6,765.55), and the major averages finished higher across the board, placing today's session firmly in the win column. 

U.S. Treasuries enjoyed a swift recovery from their shallow midweek dip, with the belly leading Thursday's advance. The 2-year note yield settled down three basis points to 3.46%, and the 10-year note yield settled down four basis points to 4.12%. 

• Nasdaq Composite: +19.1% YTD
• S&P 500: +15.2% YTD
• DJIA: +12.7% YTD
• Russell 2000: +12.5% YTD
• S&P Mid Cap 400: +6.4% YTD

Reviewing today's data:

• Total CPI for the two-month period from September to November was up 0.2% (Briefing.com consensus: 0.3%), while core CPI, which excludes food and energy, was also up 0.2% for the two-month period (Briefing.com consensus: 0.3%). The October data were not available due to the government shutdown. On a year-over-year basis, total CPI increased 2.7% versus a prior 3.0%, and core CPI was up 2.6% versus a prior 3.0%.
  • The key takeaway from the report is twofold: first, it is a messy report because of the lack of October data, but secondly and more to the point today, the disinflation in the year-over-year readings is a welcome sight for policymakers and market participants.
• Initial jobless claims for the week ending December 13 decreased by 13,000 to 224,000 (Briefing.com consensus: 229,000). Continuing jobless claims for the week ending December 6 increased by 67,000 to 1.897 million.
  • The key takeaway from the report is its low firing-low hiring dynamic, evidenced by the decrease in initial claims and the increase in continuing claims. That is a delicate balance that helps validate the Fed's willingness to walk the line with a rate cut at its December meeting, particularly when paired with the disinflation seen in the November CPI report.
• The Philadelphia Fed Index dropped to -10.2 in December (Briefing.com consensus: 2.9) from -1.7 in November. The headline reading, though, was also accompanied by a welcome 13-point drop in the prices paid index to 43.6, which is the lowest reading since June.