Stock Market Update

[BRIEFING.COM] The S&P 500 (flat), Nasdaq Composite (-0.5%), and DJIA (+0.6%) sit mixed shortly after midday as cyclical stocks resume their rally after yesterday's pullback, while considerable weakness in tech weighs on the major averages. 

The information technology sector (-1.8%) is today's laggard, facing pressure on multiple fronts. Memory storage names such as Sandisk (SNDK 321.90, -31.66, -8.95%) and Western Digital (WDC 181.71, -18.17, -9.09%) are among the worst performers after rallying this week. The PHLX Semiconductor Index is down 2.1%. 

The sector also bears the brunt of today's mega-cap weakness that has the Vanguard Mega Cap Growth ETF down 0.8%.  NVIDIA (NVDA 184.46, -4.65, -2.46%) and Broadcom (AVGO 332.30, -11.20, -3.26%) are particularly weak today. 

The health care sector (-0.3%) is the only other S&P 500 sector to trade lower.

Meanwhile, the consumer discretionary sector is near the top of the leaderboard as Amazon (AMZN 245.72, +4.16, +1.72%) and Tesla (TSLA 436.45, +5.04, +1.17%) provide strong leadership, highlighting that today's mega-cap weakness is confined to the technology sector. 

The sector also benefits from strength in homebuilder names such as Lennar (LEN 109.07, +5.14, +4.95%), boosting the iShares Dow Jones US Home ETF (ITB 100.68, +4.08, +4.23%). 

Defense names such as Huntington Ingalls (HII 377.90, +21.45, +6.02%) and L3Harris (LHX 326.82, +17.06, +5.51%) are also among the outperformers as President Trump called for a 66% increase in the military budget to $1.5 trillion in 2027. The industrial sector (+0.7%) is off session highs but still holds a solid gain.

The price of oil has increased $1.26 (+2.3%) to $57.25 per barrel, sending the energy sector (+1.8%) higher, while the financials (+1.1%) and materials (+1.1%) hold similar gains amid the cyclical rally. 

Elsewhere, the consumer staples sector (+2.3%) holds the widest gain after a sluggish start to the year. Costco (COST 927.04, +44.46, +5.04%) trades higher after reporting strong December adjusted comparable sales of +6.2%, while Constellation Brands (STZ 147.14, +6.66, +4.74%) rises after beating EPS and revenue expectations. 

Today's rotational action has the S&P 500 Equal Weighted Index (+1.0%) decidedly outperforming the market-weighted S&P 500 (+0.1%) as leadership broadens past the mega-caps. This morning's economic data also paints a picture of an economy that leaves cyclical stocks with room to run in 2026. In particular, a 4.9% surge in Q3 productivity suggests strong growth, while a 1.9% decrease in unit labor cost suggests that it comes without labor cost inflation. 

Reviewing today's data:

• Weekly Initial Claims 208K (Briefing.com consensus 217K); Prior was revised to 200K from 199K, Weekly Continuing Claims 1.914 mln; Prior was revised to 1.858 mln from 1.866 mln
  • The key takeaway from the report is that initial claims are quite low to support a view that consumer spending should hold up; however, continuing claims remain high enough to support a view that the Fed will worry enough about a softening in the labor market (i.e., weak hiring activity) such that it remains inclined to pursue easier monetary policy.
• Q3 Productivity-Prel 4.9% (Briefing.com consensus 2.5%); Prior was revised to 4.1% from 3.3%, Q3 Unit Labor Costs-Prel -1.9% (Briefing.com consensus 0.8%); Prior was revised to -2.9% from 1.0%
  • The key takeaway from the report is that it is the golden ticket for the economy (and the Fed, per chance), as it reflects strong growth without labor cost inflation.
• October Trade Balance -$29.4 bln (Briefing.com consensus -$61.3 bln); Prior was revised to -$48.1 bln from -$59.6 bln
  • The key takeaway from the report is that the headline deficit number is the lowest since June 2009. A residual takeaway is that the improvement clearly has something to do with the introduction of higher tariff rates that have detracted from import demand.
• October Wholesale Inventories 0.2% (Briefing.com consensus 0.2%); Prior 0.5%