Stock Market Update

[BRIEFING.COM] On a day chock full of economic data and central bank news, the stock market has covered a lot of ground. For example, the S&P 500 was down as much as 0.8% shortly after the open, up as much as 0.6% following the release of the February existing home sales report, and is now little changed for the day.

The constant current for those moves has been the flow of the mega-cap stocks. The Vanguard Mega-Cap Growth ETF (MGK), a proxy for the mega-cap space, is down 0.2% for the day after being down as much as 0.8% and up as much as 1.0%.

The stock market for the most part is struggling to figure out which economic message it should adhere to following yesterday's FOMC news. There was Fed Chair Powell's reassurance that the "hard data" is still pretty solid. The existing home sales report resonated today in that respect.

However, there was also a less optimistic message embedded in the Fed's Summary of Economic Projections, which showed a downgrade to the 2025 GDP growth forecast to 1.7% (from 2.1%) and an upgrade to the PCE inflation forecast to 2.7% (from 2.5%) and core-PCE inflation forecast to 2.8% (from 2.5%). These divergences played into some burgeoning concerns about a stagflation environment coming to fruition.

The result thus far today is a market that isn't showing much conviction on either side of the tape. There are four S&P 500 sectors that are up, none more than 0.3%, and seven S&P 500 sectors that are down, none more than 0.6%.

One area sticking out for its underperformance is the semiconductor space. The Philadelphia Semiconductor Index is down 1.0% ahead of Micron's (MU 103.00, +0.94, +0.9%) earnings report after the close. NVIDIA (NVDA 118.40, +0.88, +0.8%), however, has risen above the fray.

Nonetheless, NVIDIA's relative strength hasn't been enough to offset the weakness seen in Apple (AAPL 213.59, -1.65, -0.8%), which has reportedly shaken up its AI leadership ranks, and other mega-cap names like Alphabet (GOOG 164.44, -1.84, -1.1%).

The Treasury market for its part has also seen some vacillation. Earlier, the 10-yr note yield dropped to 4.17% from yesterday's settlement level of 4.26%, but it has risen back to 4.23%. Treasuries, like the other capital markets, are digesting a slate of central bank news on the other side of the FOMC decision that includes the following:

• The People's Bank of China left its 1-yr and 5-yr loan prime rates unchanged
• The Swiss National Bank cut its policy rate by 25 bps to 0.25%
• Sweden's Riksbank left it policy rate unchanged at 2.25%
• Brazil raised its policy rate by 100 bps to 14.25%
• The Bank of England left its policy rate unchanged at 4.50%
• ECB President Lagarde suggested the 25% tariff on imports imposed by the U.S. could subtract approximately 0.3 percentage points from euro area growth in the first year.

Reviewing today's economic data:

• Initial jobless claims for the week ending March 15 increased by 2,000 to 223,000 (Briefing.com consensus 220,000). Continuing jobless claims for the week ending March 8 increased by 33,000 to 1.892 million.
  • The key takeaway from the report is that this period covers the week in which the survey for the employment report is conducted, so the low level of initial jobless claims will lead economists to project another relatively solid increase in nonfarm payrolls.
• The Q4 Current Account balance showed a narrowing in the deficit to $303.9 billion (Briefing.com consensus -$334.0 billion) from an upwardly revised $310.3 billion (from -$310.9 billion).
• The March Philadelphia Fed Index dipped to 12.5 (Briefing.com consensus 10.0) from 18.1 in February. The dividing line between expansion and contraction is 0.0, so this report indicates that business activity in the Philadelphia fed region expanded in March, but at a slower pace than the prior month.
• Existing home sales increased 4.2% month-over-month in February to a seasonally adjusted annual rate of 4.26 million (Briefing.com consensus 3.95 million) from an upwardly revised 4.09 million (from 4.08 million) in January. Sales were down 1.2% from the same period a year ago.
  • The key takeaway from the report is that existing home sales actually increased, as the consensus estimate called for a 3.2% month-over-month decline. The surprising strength suggests some unleashing of pent-up demand with more inventory on the market and prospective buyers adjusting to the higher level of mortgage rates.
• February Leading Indicators declined 0.3% (Briefing.com consensus -0.2%) following an upwardly revised 0.2% decline (from -0.3%) in January.