Stock Market Update

[BRIEFING.COM] The major averages are seeking a strong finish to the week with the S&P 500 (+0.7%) and NASDAQ (+0.6%) setting fresh record highs while the Dow remains about 2.5% below its all-time peak from December.

Today's push to fresh records has been encouraged by indications that officials from the U.S. and China have reached a consensus in principle on the framework for implementing Geneva consensus. In addition, the resilient price action itself has invited more risk taking as the end of the second quarter approaches with the market overlooking the May Personal Income/Outlays report that invited some renewed worries about potential stagflation.

Ten sectors display midday gains with six trading ahead of the S&P 500 and three up 1.0% or more. Industrials (+1.4%) and the consumer discretionary sector (+1.3%) have been jockeying for the lead in recent action. The former has been supported by a strong showing from defense contractors, which is sending the iShares U.S. Aerospace & Defense ETF (ITA 187.97, +3.47, +1.88%) to a fresh record, while the latter has been underpinned by a strong response to Nike's (NKE 72.49, +9.95, +15.91% ) quarterly results coupled with post-upgrade strength in top component Amazon (AMZN 219.91, +2.79, +1.28%).

Top-weighted technology (+0.5%) has struggled to keep pace today, but this comes after a strong week that has the sector up 5.0% since last Friday versus a 3.6% week-to-date gain in the S&P 500. Chipmakers are also behind the broader market with the PHLX Semiconductor Index (+0.2%) padding this week's gain to 6.6% amid reports that President Trump is planning executive orders to support the growth of AI.

On the downside, the energy sector (-0.8%) is the lone decliner, extending this week's loss to 3.7%, as crude oil slips toward $65/bbl (-0.3%).

Treasuries are mixed, but little changed overall, with longer tenors holding slim gains that are keeping the 10-yr yield (-1 bp to 4.24%) at its lowest level since early May while the 2-yr yield is up one basis point at 3.73%.

Reviewing today's economic data:

• Personal income declined 0.4% month-over-month in May (Briefing.com consensus +0.4%) following a downwardly revised 0.7% increase (from 0.8%) in April. Personal spending declined 0.1% (Briefing.com consensus +0.2%) following a 0.2% increase in April. Real personal spending declined 0.3%, which will be a drag on Q2 GDP forecasts. The PCE Price Index increased 0.1% month-over-month, as expected, but the core-PCE Price Index jumped 0.2% month-over-month, which was higher than expected (Briefing.com consensus 0.1%). Those moves left the PCE Price Index up 2.3% year-over-year, versus 2.2% in April, and the core-PCE Price Index up 2.7% year-over-year, versus 2.6% in April.
  • The key takeaway from the report is that it has a stagflation aura about it, meaning it is a poor report for the growth outlook and a poor report for the inflation trend. That leaves the Fed between a rock and a hard policy place, yet given the Fed's attention to inflation concerns at this juncture, it seems like a report that will keep the Fed reluctant to cut rates at its July FOMC meeting.
• The final University of Michigan Index of Consumer Sentiment for June edged up to 60.7 (Briefing.com consensus 60.5) from the preliminary reading of 60.5. The final reading for May was 52.2. In the same period a year ago, the index stood at 68.2.
  • The key takeaway from the report is that the June survey showed overall improvement in current sentiment, aided by an improved view of personal finances, business conditions, and the inflation outlook that followed the pause on the reciprocal tariff rates (which is due to expire July 9) and the ensuing stock market rally.