Stock Market Update

[BRIEFING.COM] A strong tech-led rally following Oracle's (ORCL 338.44, +96.93, +40.13%) earnings report pushed the S&P 500 (+0.5%) and Nasdaq Composite (+0.4%) to new record highs, with an unexpected decline in the August PPI reading (-0.1%; Briefing.com consensus 0.3%) providing additional support by solidifying the market's current rate cut expectations.

Meanwhile, the DJIA (-0.5%) is on the retreat, reflecting pockets of weakness in the broader market as investors look to reallocate capital into the AI realm.

Oracle reported a slight EPS miss of $0.01, but investors keyed in on a 395% increase in year-over-year remaining performance obligations ("RPO") to $455 billion. The massive upside in potential future revenue sent the information technology sector (+1.9%) into an early rally, with both the iShares GS Software ETF (+2.3%) and the PHLX Semiconductor Index (+2.4%) establishing fresh record highs. 

The technology sector's opening rally was sharp, but it has not been ubiquitous across the market.

Breadth figures are razor thin, with decliners leading advancers by a less than 13-to-12 margin on the NYSE while decliners hold a 20-to-19 edge on the NASDAQ.

Sector strength is also evenly split, with five sectors trading in positive territory, five trading in negative territory, and the materials sector trading flat. 

Along with the technology sector, the utilities (+1.5%) and energy (+1.0%) post gains over 1.0%.

As for the decliners, the consumer staples (-1.4%), health care (-1.2%), and consumer discretionary (-1.2%) sectors hold the widest losses.

With Oracle's impressive rally demonstrating the continued potential for outsized gains across the AI realm, it should come as no surprise that investors are less enthused with some of the stock market's tried-and-true staples that lack an AI catalyst. 

This notion is even reflected across the mega-cap space, with poor showings from names such as Apple (AAPL 227.08, -7.27, -3.10%) and Amazon (AMZN 231.53, -6.71, -2.82%) limiting the Vanguard Mega Cap Growth ETF's gain to just 0.2% today.

As for the market's smallest names, they also now face pressure after a hot start fueled by a favorable August PPI report. 

In the wake of the report, which saw PPI and Core PPI both decrease 0.1% month-over-month, smaller cap indices such as the Russell 2000 (-0.1%) and S&P Mid Cap 400 (-0.1%) posted similar opening gains to those of the S&P 500, though they now trade beneath their flatlines. 

The report did not move rate cut expectations, which in itself is a positive catalyst, as the market is largely expecting 75-basis points in rate cuts by the end of the year. 

Overall the market has responded well to today's catalysts, though stocks falling from earlier session highs could reflect an incoming "sell the news" disposition. 

Reviewing today's data: 

• Weekly MBA Mortgage Applications Index 9.2%; Prior -1.2%
• August PPI -0.1% (Briefing.com consensus 0.3%); Prior was revised to 0.7% from 0.9%, August Core PPI -0.1% (Briefing.com consensus 0.3%); Prior was revised to 0.7% from 0.9%
  • The key takeaway from the report is that it will ease the market's angst about pass-through effects for consumers, especially with the index for final demand services sliding 0.2% month-over-month. The added takeaway is that this report will keep the market locked on its view that there will be at least 75 basis points of rate cuts by the Fed before the end of the year.
• July Wholesale Inventories 0.1% (Briefing.com consensus 0.2%); Prior 0.2%