Stock Market Update

[BRIEFING.COM] A federal judge's ruling in an antitrust case against Alphabet (GOOG 230.59, +18.60, +8.77%) that the company will not have to divest from its Chrome browser sent the stock (and several other mega-cap names) sharply higher, resulting in gains for the S&P 500 (+0.2%) and Nasdaq Composite (+0.8%), while the DJIA (-0.5%) lags the group. 

Alphabet's gains sent the communication services sector (+3.4%) to a new all-time high level despite a majority of its components trading lower today. 

The information technology sector (+0.5%), and in particular, Apple (AAPL 237.01, +7.29, +3.17%), also benefits from the ruling, as Alphabet will still be allowed to pay companies to preload its products, with Google the default search engine on Apple's iPhone. 

Generally positive sentiment across the mega-cap cohort has the consumer discretionary sector (+0.6%) holding a nice gain, underpinned by a solid move in Tesla (TSLA 340.60, +11.24, +3.41%).

The eight other S&P 500 sectors hold losses as the broader market has largely sat out today's mega-cap rally.

The Vanguard Mega Cap Growth ETF is up 0.8%, and the outperformance of the market-weighted S&P 500 (+0.2%) over the S&P 500 Equal Weighted Index (-0.3%) highlights the extent to which the market's largest names are buoying today's gains. 

Breadth figures denote an uptick in selling interest throughout the day. Advancers favored decliners by a slim margin for most of the session, but decliners now hold an advantage by a 7-to-6 ratio on the NYSE and a nearly 5-to-4 ratio on the Nasdaq.

Still, losses are relatively modest across the board, with only the energy sector (-2.2%) facing a loss wider than 0.8%. The weakness comes as crude oil falls $1.35, or 2.1%, to $64.24 per barrel. Reuters reported that OPEC+ may discuss an output increase at Sunday's meeting, which will include representatives from eight member nations.

Outside of the S&P 500, smaller-cap stocks face modest retreats, with the Russell 2000 down 0.3% and the S&P Mid Cap 400 down 0.5%. 

A small batch of companies reported earnings before the open this morning, with shares of Macy's (M 15.78, +2.30, +17.01%) surging after the company beat EPS and revenue expectations, benefitting from better-than-expected comparable sales data. The move contributes to a 0.4% gain in the SPDR S&P Retail ETF.

Today's economic data featured a softer-than-expected JOLTS—Job Opening Report for July, though the market is taking comfort in bolstered rate cut expectations at the September FOMC meeting. 

Fed Governor Christopher Waller (FOMC voter) reiterated in a CNBC interview that he supports a rate cut at the September meeting, pointing to labor market softness. Mr. Waller acknowledged the potential for a near-term uptick in inflation but said he expects it to return to the Fed’s 2.0% target within six to seven months.

St. Louis Fed President Alberto Musalem (FOMC voting member) echoed concerns of a softening labor market but noted that tariff-driven inflation could be more persistent than current estimates.

Finally, Atlanta Fed President Bostic (FOMC non-voting member) stated that he could support a rate cut in September if the job market weakens more than expected.

The CME FedWatch tool currently assigns a 95.6% probability to a 25-basis point rate cut at the September meeting, up from 92.7% yesterday. 

Reviewing today's data:

• Weekly MBA Mortgage Applications Index -1.2%; Prior -0.5%
• July Factory Orders -1.3% (Briefing.com consensus -1.4%); Prior -4.8%
  • The key takeaway from the report is that the weakness in factory orders in July was concentrated in the transportation space, so the weakness was not as acute as the headline might suggest. New orders for primary metals (+1.6%), machinery (+1.9%), computers and electronic products (+1.2%), and electrical equipment, appliances, and components (+1.9%) were all up in a good sign for factory order activity.
• July JOLTS - Job Openings 7.181 mln; Prior was revised to 7.357 mln from 7.437 mln