Stock Market Update

[BRIEFING.COM] The stock market opened to modest gains following news that NVIDIA (NVDA 170.89, +6.82, +4.12%) will resume the sale of its H20 chip in China, but the major averages have retreated from their opening highs, with rising interest rates following the June CPI report contributing to the setback.

Advanced Micro Devices (AMD 155.27, +9.03, +6.2%) made a similar announcement involving its MI308 chip, and in conjunction with reports that Alphabet (GOOG 184.40, +1.59, +0.9%) and CoreWeave (CRWV 144.67, +12.30, +9.3%) are planning heavy investments in AI infrastructure, the technology sector (+1.5%) has spent the majority of the session as the only sector trading in the green.

Strength in technology has led to a notable outperformance in the mega-cap cohort, with the Vanguard Mega Cap Growth ETF up 0.7% The Equal Weighted S&P 500 (-1.2%) has substantially underperformed the market-cap weighted S&P 500 (-0.2%) in today’s trade, which has featured broad-based selling activity.

The other ten S&P 500 sectors have come under pressure today, with the 10-yr note yield pushing 4.50% and the 30-yr bond yield topping 5.00%. Those moves have followed in the wake of the June CPI release, which saw total CPI increase 0.3% from May and core CPI increase 0.2% in that span.

The report was better than feared, but not good enough to quell the fear of tariffs driving inflation higher. Rate cut expectations decreased measurably with the CPI report. There is a 53.9% probability of at least a 25 basis point cut to 4.00-4.25% at the September FOMC meeting versus 62.6% a day ago, according to the CME FedWatch Tool.

The financials sector (-1.3%) is among the worst-performing sectors after finishing yesterday near the top with a gain of 0.7%. Several major banks reported their earnings before the open, and despite most banks surpassing earnings expectations, there is some sell-the-news action in play among companies such as JPMorgan Chase (JPM 286.02, -2.68, -0.9%), while Citigroup (C 90.04, +2.54, +2.9%) is a notable winner. Wells Fargo (WFC 78.47, -4.96, -6.0%) is more of a negative outlier, getting hit harder than others after disappointing with its net interest income guidance.

Reviewing today's data:

• June CPI 0.3% (Briefing.com consensus 0.2%); Prior 0.1%, June Core CPI 0.2% (Briefing.com consensus 0.3%); Prior 0.1%.
  • The key takeaway from the report is that it will keep the Fed in its wait-and-see mode, not yet convinced that tariffs won't drive up inflation.
• July Empire State Manufacturing 5.5 (Briefing.com consensus -11.6); Prior -16.0