Stock Market Update

[BRIEFING.COM] There were troubles for the stock market at today's open. The mega-cap stocks headed south and carried the major indices with them at the start. Things worsened, though, at 10:00 a.m. ET with the release of the February Consumer Confidence Index. That report, which featured a drop in the index from 105.3 to 98.3 (the largest monthly decline since August 2021) and a surge in average 12-month inflation expectations from 5.2% to 6.0%, sent the indices cascading to their lows for the day.

Treasuries, meanwhile, rallied on the news in a safe-haven trade that was further supported by tariff angst, growth concerns, and diplomatic tension as reports indicated the Trump administration is looking at tightening restrictions on chip exports to China. The latter report sent the Philadelphia Semiconductor Index 2.2% lower.

A $70 billion 5-yr note auction, which was met with strong demand, fortified the Treasury market's position and its fifth straight winning session. The 2-yr note yield dropped seven basis points to 4.10% and the 10-yr note yield fell 10 basis points to 4.30%.

The lower yields, however, didn't ignite the stock market, which was held back all day by relative weakness in the mega-cap cohort. Tesla (TSLA 302.80, -31.67, -9.6%) was the biggest loser of the bunch, falling sharply on heavier-than-average volume that was catalyzed by an unwinding of momentum positions and an FT report that indicated Tesla's Europe sales were down 45% year-over-year in January.

The Vanguard Mega-Cap Growth ETF (MGK) was down as much as 2.1% at its low, but ended the session down 1.2%.

Notwithstanding the weakness in the widely-held mega-cap stocks, the broader market fared better on a comparative basis. The Russell 2000 (-0.4%) fought back from a larger 1.1% decline, the S&P Midcap 400 (flat) neutralized an early 0.8% loss, and the equal-weighted S&P 500 advanced 0.1%.

Dow component Home Depot (HD 393.24, +10.82, +2.8%) provided some relief in the wake of its better-than-feared earnings report; Eli Lilly (LLY 902.36, +21.16, +2.4%) offered some support after announcing additional Zepbound vial doses at lower costs; and real estate/housing-related stocks saw some uplift on the drop in interest rates, the response to Home Depot's earnings report, and other sector earnings results.

Their aggregate strength, however, was not enough to prevent the market cap-weighted S&P 500 from suffering its fourth straight loss.

The predominately defensive disposition of today's session was reflected in the outperformance of the consumer staples (+1.7%) and health care (+0.9%) sectors, the flight-to-safety in Treasuries, and the uptick in the CBOE Volatility Index (19.79, +0.81, +4.3%), which traded as high as 21.48.

The communication services (-1.5%), energy (-1.5%), information technology (-1.4%), and consumer discretionary (-0.8%) sectors were today's biggest losers.

• DJIA: +2.5% YTD
• S&P 500: +1.3% YTD
• S&P Midcap 400: -0.8% YTD
• Nasdaq Composite: -1.5% YTD
• Russell 2000: -2.7% YTD

Reviewing today's economic data:

• The Conference Board's Consumer Confidence Index dropped to 98.3 in February (Briefing.com consensus 103.1) from an upwardly revised 105.3 (from 104.1) in January. This was the largest monthly decline since August 2021.
  • The key takeaway from the report is that the drop in confidence was seen across all age groups with worries about tariffs, inflation, and future employment prospects driving the decline.
• December FHFA Housing Price Index (actual 0.4%; prior revised to 0.4% from 0.3%)
• December S&P Case-Shiller Home Price Index (actual 4.5%; Briefing.com consensus 4.4%; prior 4.3%)