Stock Market Update

[BRIEFING.COM] Stocks had another tough session as rising oil prices continue to put broad pressure on the market. The S&P 500 (-1.5%), Nasdaq Composite (-1.9%), and DJIA (-1.6%) finished firmly lower across the board, with each index now in negative week-to-date territory. 

Oil climbed before the stock market opened amid reports that more tankers had been struck in the Strait of Hormuz. CNBC reported that Iran's new supreme leader, Mojtaba Khamenei, seeks to keep the Strait of Hormuz closed.

Energy Secretary Chris Wright told CNBC that the U.S. Navy is not yet ready to escort tankers through the strait, though it aims to be able to do so by the end of the month.

In the meantime, the supply disruption continues to push oil prices higher, which has weighed heavily on the market's expectations for policy easing from the Fed this year. Crude oil futures settled today's session $8.84 higher (+10.2%) at $95.72 per barrel. At the same time, the market's implied probability of at least a 25-basis point rate cut does not eclipse 50% until the December FOMC meeting, according to the CME FedWatch Tool.

While the energy sector (+1.0%) notched a nice gain as oil prices surged higher, the market faced broad weakness today with eight S&P 500 sectors finishing lower. 

The industrials sector (-2.5%) logged the widest retreat as airline and trucking names such as Southwest Air (LUV 38.61, -3.24, -7.74%) and Old Dominion (ODFL 176.24, -12.54, -6.64%) continue to struggle amid rising fuel costs. 

Similarly, cruise lines such as Carnival (CCL 23.92, -2.05, -7.89%) were among the worst performers in the consumer discretionary sector (-2.2%). 

Elsewhere in the sector, homebuilder names also lagged as diminishing rate cut expectations push Treasury yields higher. The iShares U.S. Home Construction ETF finished 2.9% lower. 

Tesla (TSLA 395.01, -12.81, -3.14%) was also a "magnificent seven" laggard amid a tough day for mega-cap stocks, with the Vanguard Mega Cap Growth ETF retreating 1.8%. 

Weakness across mega-cap tech pushed the information technology (-1.7%) and communication services (-1.6%) sectors lower as well. Chipmakers were a point of significant weakness, sending the PHLX Semiconductor Index 3.4% lower. 

Elsewhere, the financials sector (-1.6%) logged a similar retreat as asset managers faced renewed pressure after Bloomberg reported that Morgan Stanley (MS 154.30, -6.59, -4.10%) and Cliffwater are capping withdrawals from private credit funds after investors rushed to redeem funds.

The defensive utilities (+0.7%) and consumer staples (+0.1%) sectors garnered some modest rotational interest today as growth and cyclical sectors lagged, though the health care sector (-1.8%) faced broad pressure.

Outside of the S&P 500, the Russell 2000 (-2.1%) and S&P Mid Cap 400 (-2.1%) trailed the major averages as growth stocks underperformed today. 

The major averages will enter the final session of the week in negative territory as rising oil prices continue to prompt inflationary concerns, creating a high-volatility environment. Investors will receive the January PCE Price Index (Briefing.com consensus 0.3%) and Core PCE Price Index (Briefing.com consensus 0.4%) tomorrow morning, and while the report will not yet reflect the surge in energy prices, expectations that future readings could run hotter due to the oil supply disruption make this release particularly important.

U.S. Treasuries retreated again on Thursday with shorter tenors leading the slide amid ongoing focus on the rising price of oil and the broader implications for the global economy. The 2-year note yield settled up 13 basis points to 3.76%, and the 10-year note yield settled up seven basis points to 4.27%.

• S&P Mid Cap 400: +1.2% YTD
• Russell 2000: +0.3% YTD
• S&P 500: -2.5% YTD
• DJIA: -2.9% YTD
• Nasdaq Composite: -4.0% YTD

Reviewing today's data:

• January Housing Starts 1.487 mln (Briefing.com consensus 1.340 mln); Prior was revised to 1.387 mln from 1.404 mln, January Building Permits 1.376 mln (Briefing.com consensus 1.392 mln); Prior was revised to 1.455 mln from 1.448 mln
  • The key takeaway from the report is that it beat expectations thanks to strong growth in multi-unit starts while single-unit housing starts were down 2.8% month-over-month.
• January Trade Balance -$54.5 bln (Briefing.com consensus -$67.9 bln); Prior was revised to -$72.9 bln from -$70.3 bln
  • The key takeaway from the report is that the monthly trade deficit returned to the $50 billion range, which has been a familiar zone since last year's implementation of tariffs.
• Weekly Initial Claims 213K (Briefing.com consensus 215K); Prior was revised to 214K from 213K, Weekly Continuing Claims 1.850 mln; Prior was revised to 1.871 mln from 1.868 mln
  • The key takeaway from the report is that claims remain just above the 200,000 mark, reflecting a low-firing environment.