Stock Market Update

[BRIEFING.COM] The stock market sports a slight midday gain after overcoming some early weakness. The S&P 500 (+0.1%) trades just above its flat line while the Nasdaq (+0.5%) outperforms, having spent the entire first half ahead of the benchmark index.

The broader market faced some early pressure as continued weakness in Treasuries drove the 30-yr yield to a fresh high for the year (5.153%), but Treasuries have recovered from their weak start, which has given some encouragement to equities. The 30-yr yield is now down two basis points at 5.07% while the 10-yr yield is down four basis points at 4.56%.

In Washington, the House passed the reconciliation bill in a 215-214 party-line vote this morning. The bill, among other things, raises the SALT deduction cap to $40,000 (from $10,000), moves up the Medicaid work requirement date to December 2026 from 2029, and increases the debt ceiling by $4 trillion. The bill also has stirred concerns about the deficit. The Tax Foundation estimates that it will increase long-run GDP by 0.6% and add $3.3 trillion to the deficit over the next 10 years.

Only three sectors display midday gains, but that includes top-weighted technology (+0.4%), which trades behind communication services (+0.7%) and the consumer discretionary sector (+0.6%).

The discretionary sector has drawn some support from positive quarterly results from a handful of retailers. Advance Auto (AAP 48.02, +16.71, +53.4%) and Urban Outfitters (URBN 72.80, +13.20, +22.2%) are up sharply after beating Q1 expectations while Ralph Lauren (RL 275.40, +1.52, +0.6%) holds a slim gain after the company beat quarterly expectations, increased its dividend, and announced a new buyback. Williams Sonoma (WSM 158.99, -8.93, -5.3%) has bucked the trend, slumping back below its 200-day moving average (158.12) despite better-than-expected results.

Even with the recent turn higher, NYSE market breadth remains negative with 1.35 listings trading lower for each advancer while Nasdaq is essentially in balance.

Reviewing today's economic data:

• Initial jobless claims for the week ending May 17 decreased by 2,000 to 227,000 (Briefing.com consensus 232,000), while continuing jobless claims for the week ending May 10 increased by 36,000 to 1.903 million.
  • The key takeaway from the report is that initial jobless claims are running steady at levels that are well below recession-type readings; moreover, this report covered the period in which the survey for the May employment report was conducted and should contribute to expectations that nonfarm payrolls will again show a relatively solid print.
• Existing home sales decreased 0.5% month-over-month in April to a seasonally adjusted annual rate of 4.00 million (Briefing.com consensus 4.15 million) from an unrevised 4.02 million in March. Sales were down 2.0% from the same period a year ago.
  • The key takeaway from the report is that the median existing home price reached an April record of $414,000, putting the spotlight on affordability constraints as prices rise alongside mortgage rates.
• The S&P Global U.S. Manufacturing PMI hit 52.3 in the flash reading for May, up from 50.2 in April.
• The S&P Global U.S. Services PMI hit 52.3 in the flash reading for May, up from 50.8 in April.