Stock Market Update

[BRIEFING.COM] The stock market ended a tough week on a familiar note, with the S&P 500 (-0.6%), Nasdaq Composite (-0.9%), and DJIA (-0.3%) finishing lower amid a renewed surge in oil prices. 

Stocks opened to solid, broad-based gains as crude oil dipped this morning, trading down to nearly $92 per barrel shortly before the stock market opened.

Oil began to creep higher in the late morning hours, ultimately settling today's session 3.0% higher at $98.56 per barrel. The Wall Street Journal reported that the Pentagon is sending more Marines and warships to the Middle East, potentially to help escort tankers through the Strait of Hormuz. Meanwhile, the market is unconvinced that the war in Iran will come to a timely conclusion. 

The bounce in oil prices saw stocks largely cede their early gains. All eleven S&P 500 sectors traded higher this morning, though just five finished with gains. 

Tech stocks faced the sharpest reversal, with the information technology sector (-1.3%) finishing as the worst performer after trading over 1.0% higher to start the session. 

Oracle (ORCL 155.10, -4.06, -2.55%) gave back some of its post-earnings strength, with software stocks being a point of relative weakness today. The iShares GS Software ETF finished 0.9% lower. 

Chipmakers were among the early outperformers, and while memory storage names such as Sandisk (SNDK 661.50, +42.68, +6.90%) and Micron (MU 426.13, +20.78, +5.13%) put together solid performances, weakness across other chipmakers such as Broadcom (AVGO 322.16, -13.81, -4.11%) and Advanced Micro Devices (AMD 193.39, -4.35, -2.20%) left the PHLX Semiconductor Index up just 0.1% higher after holding a gain that exceeded 2.0%. 

Elsewhere in the sector, Adobe (ADBE 249.32, -20.46, -7.58%) lagged despite topping earnings expectations after it was announced that the company's CEO will be departing. 

Meta Platforms (META 613.71, -24.47, -3.83%) was another notable laggard today following reports that the company's latest AI model would be postponed. The stock's underperformance weighed heavily on the communication services sector (-1.0%). 

The materials sector (-1.0%) rounds out the three S&P 500 sectors that logged declines of 1.0% or wider. Fertilizer names such as Mosaic (MOS 29.31, -2.05, -6.55%) and CF Industries (CF 129.58, -6.42, -4.72%) gave back some of yesterday's strength amid reports of supply disruption in the Middle East. 

Meanwhile, the defensive utilities (+0.9%) and consumer staples (+0.5%) sectors outperformed amid the weakness in tech and other growth stocks today. 

The energy sector (+0.4%) also notched a modest gain as oil prices climbed, while the real estate (+0.2%) and financials (+0.1%) sectors finished just slightly higher. 

Investors also received a big batch of economic data this morning, which was a bit of a mixed bag. There was a downward revision to Q4 GDP (to 0.7% from 1.4%; Briefing.com consensus 1.4%), a January Personal Income/Outlays report that showed the PCE Price Index (0.3%; Briefing.com consensus: 0.3%) increase 2.8% on a year-over-year basis versus 2.9% in December, a Durable Orders report that featured a solid increase in business investment in January (+0.9%), and an uptick in job openings (6.946 million) from a level not seen since December 2020.

While the PCE Price Index showed a modest decline in the year-over-year level, the market is operating under the assumption that upcoming months will likely run hotter due to the surge in oil prices. 

Today's intraday retreat underscores the market's vulnerability to rising energy prices as the war in Iran continues, pressuring both stocks and Treasury yields as the market's rate cut expectations diminish even further. 

U.S. Treasuries of most tenors tried to bounce on Friday, but the early uptick eventually gave way to continued selling that left the complex deep in the red for the week. The 2-year note yield settled down three basis points to 3.73% (+17 basis points this week), and the 10-year note yield settled up two basis points to 4.29% (+16 basis points this week). 

• S&P Mid Cap 400: +1.1% YTD
• Russell 2000: -0.1% YTD
• S&P 500: -3.1% YTD
• DJIA: -3.1% YTD
• Nasdaq Composite: -4.9% YTD

Reviewing today's data:

• Q4 GDP was revised down to 0.7% (Briefing.com consensus 1.4%) from the advance estimate of 1.4%. The GDP Price Deflator was revised to 3.8% from 3.6% in the advance estimate.
  
  • The key takeaway from the report is that growth decelerated notably in Q4 while the Price Deflator was revised higher, which is a disappointing combination.
• Personal Income increased 0.4% month-over-month in January (Briefing.com consensus 0.4%) after rising 0.3% in December. Personal spending was also up 0.4% month-over-month (Briefing.com consensus 0.2%) following a 0.4% increase in December. The PCE Price Index rose 0.3% month-over-month (Briefing.com consensus 0.3%), while the core PCE Price Index, which excludes food and energy, rose 0.4% month-over-month (Briefing.com consensus 0.4%). On a year-over-year basis, the PCE Price Index increased 2.8% versus 2.9% in December, and the core PCE Price Index increased 3.1%, versus 3.0% in December.
  
  • The key takeaway from the report is that the Fed's preferred inflation measure, the core PCE Price Index, edged up in January, which presents a headwind to rate cut expectations.
• Durable goods orders were flat month-over-month in January (Briefing.com consensus 0.7%). Excluding transportation, durable goods orders rose 0.4% month-over-month (Briefing.com consensus 0.5%) after increasing a revised 1.3% (from 0.9%) in December.
• The key takeaway from the report is that the flat headline reading masked a solid 0.9% increase in nondefense capital goods orders, which is a proxy for business investment.
• The preliminary reading of the University of Michigan Consumer Sentiment for March fell to 55.5 (Briefing.com consensus 55.7) from the final reading of 56.6 for February. In the same period a year ago, the index stood at 57.0.
• The key takeaway from the report is that roughly half of the interviews were conducted before military action in Iran, which spurred a rally in energy prices. Therefore, the Consumer Sentiment Index is likely to be revised lower in the final reading for March.
• The January Job Openings and Labor Turnover (JOLTS) report saw 6.946 million job openings, up from an upwardly revised 6.550 (from 6.542 million).