Stock Market Update

[BRIEFING.COM] The S&P 500 (+0.3%) and Nasdaq (+0.9%) trade in the green at midday while the Dow (-0.1%) lags after outperforming yesterday.

The major averages got off to a soft start after the ADP Employment report for June pointed to a 33,000 drop (Briefing.com consensus 97,000) in nonfarm payrolls against expectations for a sizable increase.

However, the market has been able to shake off the early weakness, thanks in part to hopes for a better reading in the official Employment Situation report (Briefing.com consensus 120,000) that will be released tomorrow morning.

The rebound off opening lows received another boost after President Trump announced a trade deal with Vietnam that will remove all tariffs on U.S. exports to Vietnam while the country's imports to the U.S. will be charged a 20% duty.

Five sectors hold midday gains with technology (+1.1%) rebounding from yesterday's underperformance with help from chipmakers. The PHLX Semiconductor Index (+1.9%) trades firmly higher with added support from news that the reconciliation bill, which still has to make its way through the House of Representatives, will increase the investment tax credit for the industry group. Sector giant NVIDIA (NVDA 157.28, +3.98, +2.60%) has contributed to the group's strength, helping mask losses in about 1/3 of the remaining technology components.

Intel (INTC 22.07, -0.78, -3.41%) has sat out the rally, falling back to its 200-day moving average (21.76) after Reuters reported that the company will alter its contract manufacturing plans, which is likely to result in a big charge for the struggling chipmaker.

The consumer discretionary sector (+0.7%) is also among today's leaders, drawing encouragement from news about the trade deal with Vietnam, where some apparel manufacturers like NIKE (NKE 76.03, +2.62, +3.57%) produce their goods.

On the downside, health care (-0.8%) is the worst performing sector after yesterday's outperformance. Managed care names are struggling with Centene (CNC 34.24, -22.41, -39.56%)plunging to levels not seen since early 2017 after the company withdrew its guidance for the year due to wrong initial growth assumptions. The news prompted downgrades from UBS and JPMorgan.

Treasuries trade on their lows, extending yesterday's slide from levels not seen since early May, as the weak ADP employment report invites renewed concerns about stagflation. The 10-yr yield is up six basis points at 4.31% with its 200-day moving average (4.320%) looming above.

Reviewing today's economic data:

• The ADP Employment report pointed to a 33,000 drop in June payrolls (Briefing.com consensus 97,000) while the May increase was revised down to 29,000 from 37,000.
  • Service-providing sector (-66,000) was responsible for the decline with small business jobs (-47,000) bearing the brunt of the losses. The goods-producing sector added 32,000 positions.
• The weekly MBA Mortgage Index rose 2.7% after increasing 1.1% a week ago.