Stock Market Update

[BRIEFING.COM] The major averages are mixed at midday with the S&P 500 (unch) and Nasdaq (-0.2%) just below their flat lines while the Dow (+0.3%) outperforms. Small caps are struggling, keeping the Russell 2000 lower by 0.8%.

The flat showing from the S&P 500 is somewhat impressive, considering the index was down more than 60 points at the start of today's session. The lower open resulted from some profit taking after last week's run that was accentuated by news that the U.S. lost its final triple-A credit rating from the three major ratings agencies, as Moody's lowered its view of U.S. government debt to Aa from Aaa. The agency cited the persistent growth in debt for the action but Treasury Secretary Bessent downplayed the impact of the downgrade, saying that ratings actions are a lagging indicator.

Treasuries slumped out of the gate, sending the 30-yr yield to a fresh 2025 high (5.037%), but the sharply lower start has been followed by a steady bounce that has helped longer tenors recover roughly half of their losses while the 2-yr note is almost back to its settlement level from Friday. The 30-yr yield remains up five basis points at 4.95% while the 10-yr yield is up four basis points at 4.48%.

All eleven sectors started today in the red, but only four continue trading lower with energy (-1.6%), consumer discretionary (-0.4%), and technology (-0.3%) showing relative weakness while health care (+0.6%), consumer staples (+0.4%), and financials (+0.2%) are among the outperformers.

The energy sector is seeing broad-based weakness even as crude oil climbs $0.61, or 1.0%, to $62.58/bbl while technology and consumer discretionary shares are pulling back after leading the recent rally. Chipmakers are contributing to the underperformance in technology with the PHLX Semiconductor Index (-0.7%) narrowing its May gain to 15.5% versus a 7.0% month-to-date advance in the S&P 500.

On the upside, the health care sector has received significant support from UnitedHealth (UNH 314.10, +22.19, +7.6%) as the stock continues last week's bounce off levels not seen in more than five years. The stock was downgraded to Hold from Buy at TD Cowen, but company executives disclosed the purchase of nearly $30 million worth of shares, which is being perceived as an encouraging signal about the health of the company, whose stock plummeted nearly 60% in just over a month.

Bank stocks are having a pretty good showing even though top component JPMorgan Chase (JPM 266.05, -1.51, -0.6%) has given back an earlier gain. The bank raised its forecast for FY25 net interest income to $94.5 bln from $94.0 bln but that upward revision is being offset by concerns about weakness in investment banking revenue during the current quarter.

Today's economic data was limited to the Leading Index for April, which fell 1.0% (Briefing.com consensus -0.7%) after decreasing a revised 0.8% (from -0.7%) in March.