Stock Market Update

[BRIEFING.COM] The stock market has staged a substantial recovery from its opening lows, with the S&P 500 (+0.1%), Nasdaq Composite (-0.4%), and DJIA (+0.8%) trading mixed near midday. Semiconductor and other AI-related stocks remain under considerable pressure, but rotational buying across the broader market has helped offset some of that weakness, pushing the DJIA firmly higher and bringing the S&P 500 back into positive territory.

Technology stocks faced another round of heavy selling at the open amid persistent concerns about the financing of the massive AI infrastructure buildout, particularly the industry's reliance on debt to support ambitious expansion plans. CoreWeave (CRWV 65.22, -0.56, -0.86%), which plunged 15% yesterday amid mounting scrutiny of its debt obligations, has recovered considerably from its early lows following a Bloomberg report that NVIDIA (NVDA 216.66, -4.64, -2.10%) CEO Jensen Huang believes the company's financial position is improving and does not require a financial backstop. Growing competition from Chinese memory chipmakers has added to the pressure, while Taiwan Semiconductor Manufacturing (TSM 417.18, -12.82, -2.98%) earnings report failed to provide the reassurance investors were looking for despite better-than-expected results and above-consensus revenue guidance.

The information technology sector (-1.1%) and PHLX Semiconductor Index (-2.6%) have recovered considerably from their opening lows but remain firmly lower. Hardware names such as Dell (DELL 463.72, -44.22, -8.70%) are also struggling, while weakness among companies associated with the AI buildout is contributing to the industrials sector's (-0.4%) underperformance.

The energy sector (-1.5%) is another notable laggard, surrendering some of its recent gains despite a sizable increase in crude oil prices. WTI crude futures were recently up $3.18 (+3.3%) at $98.28 per barrel.

The broader market, however, is displaying considerably more strength than the Nasdaq Composite suggests. Eight S&P 500 sectors are trading higher, led by the health care sector (+2.6%), where UnitedHealth (UNH 411.01, +15.39, +3.89%) and Eli Lilly (LLY 1268.41, +59.67, +4.94%) are among the outperformers. The consumer staples sector (+1.1%) has backed off its best levels but remains firmly higher, while the financials sector (+1.1%) is approaching session highs amid strength in insurance brokerage stocks.

The consumer discretionary sector (+0.7%) and real estate sector (+1.1%) are also participating in the advance, with the latter benefiting from a sharp decline in Treasury yields. Advancers outnumber decliners by a roughly 5-to-2 ratio on the NYSE and roughly 5-to-3 on the Nasdaq, underscoring the breadth of the rotational buying. The Russell 2000 (+0.6%) and S&P Mid Cap 400 (+0.4%) are also higher, reflecting participation beyond the large-cap averages.

The Treasury market has attracted substantial safe-haven buying interest amid the ongoing turbulence in technology stocks, pushing the 10-year note yield down 10 basis points to 5.09%. The decline has provided support for rate-sensitive groups, including homebuilders, even as crude oil prices continue to climb.

On the economic front, this morning's hotter-than-expected September Producer Price Index report reinforced inflation concerns following yesterday's CPI release, although it did little to materially alter expectations for an October Fed rate hike.

Overall, the session continues to reflect a pronounced divide between struggling semiconductor and AI-related stocks and a broader market finding support from defensive and rate-sensitive groups. The recovery from early lows and relatively positive market breadth suggest that selling pressure remains concentrated in technology rather than extending across the market as a whole.

Reviewing today's data:

• Sep PPI 1.3% (Briefing.com consensus 0.5%; Prior 0.5% revised from 0.4%)
• Sep Core PPI 0.7% (Briefing.com consensus 0.3%; Prior 0.2%)
• Retail sales jumped 0.8% month-over-month in September (Briefing.com consensus: 0.3%) following an upwardly revised 1.3% (from 1.2%) in August. Excluding autos, retail sales rose 0.9% (Briefing.com consensus 0.3%) after increasing 1.4% in August.
  • The key takeaway from the report is that there was continued strength across many discretionary spending categories that wasn't just driven by higher prices. Spending at food services and drinking places, for instance, was up 1.1% after increasing 1.4% in August.
• Sep Retail Sales, ex-auto 0.9% (Briefing.com consensus 0.3%; Prior 1.4%)
• Initial jobless claims for the week ending October 10 increased by 1,000 to 199,000 (Briefing.com consensus: 200,000). Continuing jobless claims for the week ending October 3 decreased by 4,000 to 1.710 million.
  • The key takeaway from the report continues to be that it signals low layoff activity, which is a reflection of a solid demand environment.
• Oct Empire State Manufacturing 25.5 (Briefing.com consensus 7.0; Prior 7.6)
• Oct Philadelphia Fed Index 20.9 (Briefing.com consensus 29.0; Prior 37.8)
• Aug Business Inventories 0.4% (Briefing.com consensus 0.4%; Prior 0.9% revised from 0.8%)
• 10/10 EIA Natural Gas Inventories +67 bcf (Prior +85 bcf)