Stock Market Update

[BRIEFING.COM] A lack of major developments on the trade front coupled with a balance between small-cap and mid-cap outperformance and mega-cap underperformance kept the major averages within a tight range of flat opening levels following yesterday's consolidation activity.

After signing an executive order officially postponing the July 9 trade deadline, President Trump said there will be no extensions past August 1 for countries that got letters yesterday and for countries that will receive letters today, tomorrow, and for the next short period of time.

Commerce Secretary Howard Lutnick said in a CNBC interview that the EU has made "significant real offers" to open up markets to the U.S., though initial reports now suggest that the EU will receive a letter from the Trump administration in the coming days.

Altogether, the developments on the trade front were in line with expectations and did little to sway the broader markets, though President Trump's actions today did have some sector-specific impacts.

Copper prices surged and copper futures settled up $0.56, or 11.2%, at $5.58/lb after President Trump announced a 50% tariff on copper that will likely start August 1. Shares of Freeport-McMoRan (FCX 46.29, +1.16, +2.57%) traded sharply higher following the announcement, and helped the materials sector (+0.8%) emerge as one of the best performers.

Oil companies in the top-performing energy sector (+2.7%) benefitted from President Trump signing an Executive Order to eliminate subsidies for "green" energy sources like wind and solar "in furtherance of the One Big Beautiful Bill Act."

ConocoPhillips (COP 95.65, +3.10, +3.35%), Chevron (CVX 152.93, +5.53, +3.75%), and Exxon Mobil (XOM 114.14, +3.03, +2.73%) all captured gains following the order and in conjunction with an increase in oil prices that saw crude oil futures settle up 0.5% to $68.30 per barrel.

Though the market as a whole traded relatively flat throughout the session, there were some noticeable trends that kept the major averages stable.

Notably, small-cap and mid-cap stocks outperformed the mega-caps, as the Russell 2000 (+0.7%) and the S&P Midcap 400 (+0.5%) outperformed the S&P 500 (-0.1%), while the Vanguard Mega Cap ETF (-0.15%) lagged. Positive breadth figures in which advancers outpaced decliners by a nearly 2:1 ratio on the NYSE and the Nasdaq further evidenced this trend.

The financials sector (-0.9%) was among the weakest performers due in part to its mega-cap components, as HSBC downgraded JPMorgan Chase (JPM 282.66, -9.31, -3.2%), Bank of America (BAC 47.14, -1.52, -3.1%), and Goldman Sachs (GS 697.04, -13.88, -2.0%).

Tesla (TSLA 297.81, +3.87, +1.32%) rebounded from yesterday's unfavorable press, but a poor performance from top component Amazon (AMZN 219.33, -4.14, -1.9%) kept the consumer discretionary sector (-0.6%) out of positive territory following reports that Amazon's initial prime day sales were down 14% from last year's figure.

Additionally, underperformance from Apple (AAPL 210.01, +0.06, +0.0%) and Microsoft (MSFT 496.62, -1.10, -0.2%) stifled further gains in the technology sector (+0.4%) despite an impressive showing from chip stocks that saw the PHLX Semiconductor Index close with a 1.8% gain, nearly negating yesterday's loss of 1.9%.

U.S. Treasuries saw some modest selling pressure today, most of which occurred ahead of the cash session. The cash session was dictated by little change across the curve despite a relatively weak 3-yr note auction and talk of more tariffs (and tariff letters) coming soon. A New York Fed survey showing a downtick in short-term inflation expectations, though, offered a measure of support in conjunction with a prevailing belief that better trade deals will ultimately be announced and that tariffs for major trading partners will be less onerous than feared.

The market will look to further developments on the trade front and the release of FOMC minutes tomorrow in hopes of shaking its relatively sluggish start to the week.

• S&P 500: +5.9% YTD
• Nasdaq: +5.7% YTD
• DJIA: +4.0% YTD
• S&P 400: +1.6%YTD
• Russell 2000: -0.1% YTD

Reviewing today's economic data:

• June NFIB Small Business Optimism Index held fairly steady at 98.6 (prior 98.8)
• The high yield of 3.891% at the $58 bln 3-yr note auction tailed the when-issued yield of 3.887% on weak demand from indirect bidders
• May Consumer Credit $5.1 bln following a downwardly revised $16.9 bln (from $17.9 bln) in April.
  • The increase was driven entirely by nonrevolving credit, which was up $8.6 bln.