Stock Market Update

[BRIEFING.COM] The stock market started today's session with a good bit of resolve, undaunted for the most part by the news over the weekend that the U.S. had destroyed three nuclear facilities in Iran. That resolve was based on a belief, supported by sliding oil prices, that the conflict will be contained and that there won't be any major disruption to oil supplies in the Middle East and flowing through the Strait of Hormuz.

Early buying interest was also influenced by some encouraging economic data, Fed Governor Bowman's admission that she could support a rate cut at the July FOMC meeting if certain conditions were met, namely inflation pressures remaining contained, and a strong move by Tesla (TSLA 350.40, +28.24, +8.77%) following the launch of its robotaxi service in Austin, TX.

There was little follow-through on the opening move, though, as the S&P 500 seemed to run into some round-number resistance at the 6,000 level. Additionally, a hot start for the semiconductor stocks, which had the Philadelphia Semiconductor Index (-0.5%) up as much as 1.1%, cooled off.

The stock market, however, hit an air pocket in the last hour on a Wall Street Journal report that U.S. officials had warned of a credible threat to U.S. soldiers in the Middle East, with Iran positioning missiles for a possible strike.

All things considered, the stock market is not operating from an objectively fearful standpoint, although it is respectful of the fact that there could be a military escalation and that the market is trading with a premium valuation that is predicated on there being positive outcomes. 

The rate-sensitive utilities (+0.4%) and real estate (+0.3%) sectors are exhibiting relative strength, driven in part by the drop in Treasury yields that has been associated with a safe-haven trade and Ms. Bowman's comments. The 2-yr note yield is down eight basis points to 3.83%, and the 10-yr note yield is down eight basis points to 4.30%.

The best-performing sector, though, is the consumer discretionary sector (+0.9%), which is being steered by Tesla. The energy sector (-1.2%) is today's biggest loser, with WTI crude futures now down 2.4% to $72.08/bbl.

Reviewing today's economic data:

• Flash June S&P Global U.S. Manufacturing PMI (Actual 52.0; prior 52.0) and flash June S&P Global U.S. Services PMI (Actual 53.1; prior 53.7)
• Existing home sales increased 0.8% month-over-month in May to a seasonally adjusted annual rate of 4.03 million (Briefing.com consensus 3.94 million) from an unrevised 4.00 million in April. Sales were down 0.7% from the same period a year ago.
  • The key takeaway from the report is that the inventory of existing homes for sale is rising, yet overall demand remains subdued because of affordability constraints stemming from high prices and high mortgage rates.