Stock Market Update

[BRIEFING.COM] The stock market traded in a relatively stable manner following the pre-market earnings reports of several large banks and the release of the relatively tame June PPI, while dealing with some headline volatility.

The June PPI and Core PPI figures were unchanged month-over-month, and both decreased year-over-year from May. Interest rates fell in response to the optimistic data, which influences core PCE, the Fed's preferred inflation gauge. The 10-year note yield traded down as much as five basis points to 4.44%.

A volatile pocket of trading occurred late in the morning trade when news reports suggested President Trump is likely to fire Fed Chair Jerome Powell. The president, himself, said in an Oval Office interview with the press pool shortly after the headlines circulated that he wouldn't rule out anything, but that it is highly unlikely that he will fire Fed Chair Powell, unless there is fraud.

The financials sector (+0.7%) was an early performer, supported by the second consecutive day of positive earnings reports from large banks.

Goldman Sachs (GS 708.82, +6.31, +0.9%), Morgan Stanley (MS 139.79, -1.80, -1.3%), and Bank of America (BAC 46.03, -0.12, -0.26%) all surpassed EPS expectations. The post-report weakness in the stocks was mainly a sell-the-news reaction following an impressive run, which also seemed to be the case yesterday.

The information technology sector (+0.3%) lagged in the early going as it was burdened by ASML (ASML 754.45, -68.57, -8.33%), which topped Q2 earnings expectations, stating that the company cannot confirm if it will deliver growth in FY26. The sector was able to recover throughout the trade and post a finishing gain, but weakness among chip makers was a notable trend that saw the PHLX Semiconductor Index finish with a loss of 0.4%.

For quite some time, only the defensive health care (+1.2%) and real estate (+1.1%) sectors traded in positive territory, with the health care sector getting added support from Johnson & Johnson (JNJ 164.77, +9.60, +6.2%) reporting strong upside results for Q2 EPS and revenues and raising its FY25 guidance.

The president’s clarification that it is highly unlikely that he will fire Fed Chair Powell helped stocks recover from the headline volatility, with broad-based support enabling the major averages to finish just below their session highs. Eight S&P 500 sectors finished in positive territory.

Support was distributed across stocks of all sizes, though there was a noticeable outperformance in small-cap stocks, evidenced by a 1.0% gain in the Russell 2000.

The market cap-weighted S&P 500 (+0.3%) finished similarly to the equal-weighted S&P 500 (+0.4%).

U.S. Treasuries had an exciting cash session, alternating between the inflation optimism that followed a relatively tame-looking June PPI report and the inflation angst surrounding reports that President Trump may soon fire Fed Chair Powell.

The 2-yr note yield settled down seven basis points at 3.89%, while the 10-yr note yield fell three basis points to 4.46%.

• S&P 500 +6.5% YTD
• DJIA: +4.0% YTD
• S&P 400: +0.6% YTD
• Russell 2000: -0.1% YTD

• Reviewing today's data:
  • The index for final demand was unchanged month-over-month in June (Briefing.com consensus: 0.2%) following an upwardly revised 0.3% increase (from 0.1%) in May. The index for final demand, less foods and energy, was also unchanged month-over-month (Briefing.com consensus: 0.2%) following an upwardly revised 0.4% increase (from 0.1%) in May.The index for final demand was up 2.3% year-over-year, versus 2.7% in May, while the index for final demand, less foods and energy, was up 2.6% year-over-year, versus 3.2% in May.
    • The key takeaway for the market is the disinflation seen on a month-over-month and year-over-year basis. That is clearly moving in the Fed's preferred direction, and the unchanged readings for June should foster good thoughts about what the PCE Price Index for June will show when it is released.
  • Industrial production increased 0.3% month-over-month in June (Briefing.com consensus 0.1%) following an upwardly revised unchanged reading (from -0.2%) in May. The capacity utilization rate was 77.6% (Briefing.com consensus 77.4%), versus an upwardly revised 77.5% (from 77.4%) in May. Total industrial production increased 0.7% yr/yr while the capacity utilization rate was 2.0 percentage points below its long-run average.
    • The key takeaway from the report is that the jump in industrial production in June was driven mostly by an increase in the output of utilities, which tends to be volatile based on weather conditions. Manufacturing output was up, but only by a modest 0.1% despite a more conciliatory tariff environment.