Stock Market Update

[BRIEFING.COM] The major averages are lower at midday after an early rally, sparked by a softer August employment report, briefly carried the S&P 500 (-0.5%) and Nasdaq Composite (-0.3%) to fresh all-time highs. The DJIA (-0.5%) holds a similar loss at this juncture. 

Markets now fully price in a 25-basis-point September cut to 4.00–4.25%, with a 14% chance of a 50-point move, according to the CME FedWatch Tool. Odds of further 25-basis-point cuts stand at over 80% for October and over 75% for December, with modest probabilities for larger reductions.

Investors have since engaged in some "sell the news" profit-taking following the policy-friendly development, while there is also a cautious undertone surrounding the implications of continued labor market weakness.

Seven S&P 500 sectors trade in negative territory, with the energy (-2.0%), financials (-1.9%), and industrials (-1.1%) sectors holding losses wider than 1.0%.

The technology sector (-0.5%) also trades below its baseline after a nice opening gain, with Broadcom's (AVGO 338.01, +31.91, +10.42%) stellar earnings report garnering quite a bit of attention. The company disclosed an additional large AI customer, with the announcement weighing on rivals NVIDIA (NVDA 166.70, -4.96, -2.89%) and Advanced Micro Devices (AMD 152.77, -9.02, -5.58%).

In other earnings news, lululemon athletica (LULU 169.04, -37.05, -17.98%) trades sharply lower after beating EPS expectations but issuing downside guidance. 

The broader consumer discretionary sector now trades on its flatline, with a nice gain in Tesla (TSLA 348.89, +10.36, +3.06%) offsetting losses elsewhere.

Homebuilder names are a point of strength in today's market, with the iShares U.S. Home Construction ETF advancing 2.43%.

Outside of the S&P 500, smaller cap names are outperforming the broader market, benefitting from the promise of future rate-friendlier environments. The S&P MidCap400 and Russell 2000 are both up 0.2%. 

Reviewing today's data:

• August Nonfarm Payrolls 22K (Briefing.com consensus 78K); Prior was revised to 79K from 73K, August Nonfarm Private Payrolls 38K (Briefing.com consensus 90K); Prior was revised to 77K from 83K, August Unemployment Rate 4.3% (Briefing.com consensus 4.3%); Prior 4.2%, August Avg. Hourly Earnings 0.3% (Briefing.com consensus 0.3%); Prior 0.3%, August Average Workweek 34.2 (Briefing.com consensus 34.3); Prior was revised to 34.2 from 34.3
  • The key takeaway is that the overall report leaned to the softer side of things, which isn't great economically speaking, yet, because it leaned that way, it also fortified the market's belief that there will be a rate cut at the September FOMC meeting and its hope that there will be additional rate cuts at the October and December FOMC meetings—a view that is supportive for a market pining for rate cut