Stock Market Update

[BRIEFING.COM] The stock market's advance pushed the S&P 500 (+0.3%) to record intraday (6,508.23) and closing (6,501.90) highs for the second consecutive day, while the Nasdaq Composite (+0.5%) came up just shy of its own closing high, and the DJIA (+0.2%) finished with a more modest gain.

Stocks saw a decent opening push that followed an upbeat Q2 GDP revision and another low initial jobless claims report, but an early 2.5% slide in NVIDIA (NVDA 180.17, -1.43, -0.79%) made for a bumpy morning that seated the major averages in negative territory.

NVIDIA's Q2 results, which were reported yesterday after the close, were a mixed bag. While both earnings and revenue exceeded expectations, the upside relative to consensus estimates was relatively modest. The company's guidance for Q3 matched analysts' forecasts, breaking from its usual pattern of beating and raising targets. Data Center revenue jumped 56% year-over-year to $41.1 billion but fell short of Street estimates due to a $4 billion sequential decline in H20 revenue, which was impacted by export restrictions. No H20 sales to China occurred in Q2, and none are anticipated for Q3.

The stock would ultimately close much improved from its session lows, bolstering an otherwise strong day from chipmakers that saw the PHLX Semiconductor Index finish with a 0.5% gain. The broader information technology sector advanced 0.7% as well.

The communication services sector (+0.9%) finished as the best-performing S&P 500 sector, with strength in its mega-cap components Alphabet (GOOG 212.37, +4.16, +2.00%) and Meta Platforms (META 751.11, +3.73, +0.50%) underpinning the gain.

Mega-cap strength played a key role in today's record-setting advance, as the market-weighted S&P 500 (+0.3%) outperformed the S&P 500 Equal Weighted Index (-0.1%). The Vanguard Mega Cap Growth ETF finished with a 0.6% gain.

Outside of the mega-cap space, the energy sector (+0.7%) rounded out the top three S&P 500 sectors, benefitting from crude oil futures settling today's session $0.48 higher (+0.8%) at $64.62 per barrel.

The consumer discretionary (+0.3%), financials (+0.2%), and industrials (+0.2%) sectors also captured modest gains. The materials sector finished flat.

Losses in declining sectors were relatively modest today. The defensive-oriented utilities (-0.9%), consumer staples (-0.6%), and health care (-0.5%) sectors were the biggest losers, while the real estate sector (-0.3%) also retreated.

Retailer stocks were another point of relative weakness after a slate of household names, such as Best Buy (BBY 72.66, -2.79, -3.70%), Dick's Sporting Goods (DKS 215.08, -10.93, -4.84%), Dollar General (DG 111.71, +0.51, +0.46%), and Five Below (FIVE 150.03, +5.62, +3.89%), reported earnings. The SPDR S&P Retail ETF (-0.9%) improved throughout the session with the broader market, closing 0.4 percentage points above its session lows.

With the market successfully navigating NVIDIA's earnings, attention now turns to tomorrow's PCE report, the Fed's preferred inflation gauge. The probability of a 25-basis point rate cut at the September FOMC meeting remained steady at 87.2%, according to the CME FedWatch tool.

Speaking of the next FOMC meeting, Bloomberg reported that Fed Governor nominee Stephen Miran's confirmation process may be fast-tracked to appoint him before the gathering. In related news, Fed Governor Lisa Cook filed a suit challenging her dismissal by President Trump, with Bloomberg reporting that Ms. Cook's lawyers suggest a "clerical error" is behind the mortgage issues. An initial hearing is scheduled for tomorrow morning.

U.S. Treasuries of most tenors climbed on Thursday while the 2-year note underperformed after yesterday's show of relative strength. The 2-year note yield settled up two basis points to 3.64%, and the 10-year note yield settled down three basis points to 4.21%.

• Nasdaq Composite: +12.4% YTD
• S&P 500: +10.6% YTD
• DJIA: +7.3% YTD
• Russell 2000: +6.7% YTD
• S&P Mid Cap 400: +4.8% YTD

Reviewing today's data:

• Q2 GDP - Second Estimate 3.3% (Briefing.com consensus 3.0%); Prior 3.0%, Q2 GDP Deflator - Second Estimate 2.0% (Briefing.com consensus 2.0%); Prior 2.0%
  • The key takeaway from the report is that the Q2 strength revolved around the decrease in imports (-29.8%), which is a subtraction in the calculation of GDP. The next exports component contributed 4.95 percentage points to Q2 GDP growth versus 4.99 points with the advance estimate.
• Weekly Initial Claims 229K (Briefing.com consensus 236K); Prior was revised to 234K from 235K, Weekly Continuing Claims 1.954 mln; Prior was revised to 1.961 mln from 1.972 mln
  • The key takeaway from the report is that initial jobless claims—a leading indicator-- continue to run at low levels, refuting the notion that the labor market is weak. Granted, the labor market has softened a bit, but it is not weak.
• July Pending Home Sales -0.4% (Briefing.com consensus 0.3%); Prior -0.8%