Stock Market Update

[BRIEFING.COM] The S&P 500 (+0.5%) holds a modest midday gain, looking to snap its three-day skid that followed the setting of a fresh record high. The benchmark index remains down 0.4% for the week while the Nasdaq (+0.2%) is continuing this week's underperformance (-0.9% week-to-date).

The early advance has featured some hesitation, as profit taking in mega cap names like Meta Platforms (META 741.10, -7.81, -1.04%), NVIDIA (NVDA 177.34, -0.36, -0.20%), and Oracle (ORCL 284.28, -7.05, -2.42%) masks strength in most other areas of the market. To that end, nine sectors trade in the green with six holding gains of 0.8% or more. Market breadth is firmly positive with more than two NYSE issues trading higher for each decliner.

Today's news flow has been on the light side, but President Trump announced some imminent tariff changes, saying that a 100% tariff will be placed on imported branded and generic pharmaceuticals if the producer is not building a domestic presence. Heavy truck imports will face a 25% tariff while kitchen cabinets, bathroom vanities, and associated products will be hit with a 50% tariff. Upholstered furniture will come with a 30% tariff and all these changes will be effective October 1. There is also a high likelihood of a government shutdown next week, but past instances have had a limited impact on the market.

Economic data released this morning served as a reminder of the ongoing trend of positive activity countered by sticky inflation. Still, the market's rate cut expectations for the remainder of the year increased a touch after the release of the solid Personal Income/Outlays report.

The energy sector (+1.6%) has held the lead since the start, helped by a 1.4% rise in the price of oil toward $66/bbl, a seven-week high. The energy sector has gained 5.3% this week, outpacing the remaining ten groups by a big margin.

The consumer staples sector (-0.2%) is today's worst performer, but that is largely owed to a post-earnings retreat in the shares of Costco (COST 922.23, -21.08, -2.23%). The stock hit its lowest level since early April despite a Q4 beat while most other components of the consumer staples sector trade in the green.

Treasuries hold modest losses after dipping from their opening highs. The 10-yr yield is up one basis point at 4.18% today and up four basis points for the week.

Reviewing today's data:

• Personal income increased 0.4% month-over-month in August (Briefing.com consensus: 0.3%) following a 0.4% increase in July. Personal spending jumped 0.6% month-over-month (Briefing.com consensus: 0.4%) following a 0.5% increase in July. The PCE Price Index was up 0.3% month-over-month, as expected, and the core PCE Price Index, which excludes food and energy, was up 0.2%, also as expected. On a year-over-year basis, the PCE Price Index was up 2.7%, versus 2.6% in July, and the core PCE Price Index was up 2.9%, unchanged from July.
  • The key takeaway from the report is the lack of headline surprise for the inflation prints. That helped calm some of the market's angst about tariff pass-through being more demonstrable; therefore, it was better than feared, which qualifies in a relative sense as being good. The solid income and spending results were a bonus, befitting an economy that is still on a growth trajectory.
• The final University of Michigan Consumer Sentiment reading for September checked in at 55.1 (Briefing.com consensus: 55.4) versus the preliminary reading of 55.4. The final reading for August was 58.2. In the same period a year ago, the index stood at 70.1.
  • The key takeaway from the report is that expectations for the macroeconomy, including the labor market and business conditions, and personal finances receded.