Stock Market Update

[BRIEFING.COM] The stock market traded in a mixed fashion on the heels of yesterday's rate cut optimism-fueled rally, though strong performances across the mega-caps pushed the Nasdaq Composite (+0.4%) and S&P 500 (-0.1%) to fresh record highs.

The tech-heavy Nasdaq Composite benefitted the most from today's advance, establishing a new all-time high of 22,182.34 and a record closing high of 22,141.10.

The S&P 500 set a record high of 6,600.21 shortly before the close, but the index ran into some round number resistance at that mark and promptly retreated beneath its flatline.

Meanwhile, the DJIA (-0.5%) traded lower for the duration of the session, reflecting pockets of weakness in the broader market. 

Only the utilities (+0.6%), consumer discretionary (+0.6%), information technology (+0.5%), and communication services (+0.2%) sectors closed with a gain, though these sectors (with the exception of the thinly traded utilities sector) have the highest concentration of mega-cap names. 

Most notably, Tesla's (TSLA 395.94, +27.13, +7.36%) strong move saw it finish with a 12.9% gain for the week, helping to mask Amazon's (AMZN 228.15, -1.80, -0.78%) loss in the consumer discretionary sector.

Microsoft (MSFT 509.90, +8.89, +1.77%) and Apple (AAPL 234.07, +4.04, +1.76%) supported the information technology sector, which saw just modest strength in its chipmaker names, pushing the PHLX Semiconductor Index to a 0.2% gain.

Though not mega-caps themselves, Paramount Skydance's (PSKY 18.79, +1.33, +7.62%) potential majority-cash acquisition of Warner Bros. Discovery (WBD 18.91, +2.74, +16.94%) pushed both stocks higher for the second consecutive day in the communication services sector, despite a report from Bloomberg today that the transaction will likely face regulatory headwinds. 

The sector's largest names, Alphabet (GOOG 241.28, +0.50, +0.21%) and Meta Platforms (META 755.59, +4.69, +0.62%), moved slightly higher late in the afternoon, helping the sector finish near session highs. 

Ultimately, the market's heaviest components played a crucial role in limiting losses at the index level. The Vanguard Mega Cap Growth ETF closed with a 0.6% gain, and the market-weighted S&P 500 (-0.1%) outperformed the S&P 500 Equal Weighted Index (-0.8%). 

While losses were relatively broad-based, they were also modest. Only the health care sector (-1.1%) closed with a loss wider than 1.0%. COVID vaccine stocks such as Moderna (MRNA 23.51, -1.88, -7.40%) and Pfizer (PFE 23.89, -0.97, -3.90%) dipped following a Washington Post report that suggested health officials from the Trump administration plan to link COVID vaccines to the deaths of 25 children.

The sector also faced pressure in its biotech names, with the iShares Biotechnology ETF slumping 2.0% today. 

Outside of the S&P 500, smaller cap indices such as the Russell 2000 (-1.0%) and S&P Mid Cap 400 (-1.1%) underperformed after surging yesterday on bolstered rate cut expectations. 

Looking ahead, attention now turns squarely to next week's FOMC meeting. A 25-basis point rate cut is fully priced in, but the updated dot plot and Fed Chair Powell's press conference will put the market's expectations of three total rate cuts by year-end to the test. 

U.S. Treasuries retreated on Friday with longer tenors leading the slide, though even with today's underperformance, 10s and 30s added to their gains from the first week of September while 5s and shorter tenors finished the week in negative territory. The 2-year note yield settled up three basis points to 3.56% (+5 basis points this week) and the 10-year note yield settled up five basis points to 4.06% (-3 basis points this week).

• Nasdaq Composite: +14.7% YTD
• S&P 500: +12.0% YTD
• DJIA: +7.7% YTD
• Russell 2000: +7.5% YTD
• S&P Mid Cap 400: +5.2% YTD

Reviewing today's data:

• The preliminary University of Michigan Consumer Sentiment reading for September checked in at 55.4 (Briefing.com consensus: 59.2) versus the final reading of 58.2 for August. In the same period a year ago, the index stood at 70.1.
  • The key takeaway from the report is that the pullback in consumer sentiment was paced by fading economic views among lower-income and middle-income consumers.