Stock Market Update

[BRIEFING.COM] The S&P 500 (-1.2%), Nasdaq Composite (-1.0%), and DJIA (-1.9%) sit at session lows shortly after midday as the broader market struggles against a sharp surge in oil prices. 

Stocks notably had a strong session yesterday as oil prices stabilized amid headlines that the Trump administration would take action to protect oil tankers traveling through the Strait of Hormuz. However, the conflict in Iran continues to escalate today, and tanker traffic remains at a standstill with no clear timeline for when normal activity may resume. 

Additionally, Iran has claimed that it struck a U.S. oil tanker in the Persian Gulf, though the report remains unconfirmed. 

Crude oil is currently up $4.87 (+6.5%) to $79.53 per gallon, now up over 37% year-to-date. 

Fears of supply disruption weigh heavily across the broader market, with the energy sector (+0.2%) now the only S&P 500 sector remaining in positive territory.

The industrials sector (-3.2%) holds the widest loss with airline names such as Delta Air Lines (DAL 59.54, -4.29, -6.72%) among today's laggards amid the spike in oil prices. 

The materials sector (-2.5%) also lags amid a pullback in metal prices today, while Walmart (WMT 122.69, -5.12, -4.01%) provides weak leadership for the consumer staples sector (-2.0%), and the health care sector (-2.4%) faces broad weakness. 

Meanwhile, the information technology sector (-1.0%) held a gain for most of the session amid another strong session for software stocks that seats the iShares GS Software ETF with a 1.3% gain. 

Broadcom (AVGO 330.42, +12.89, +4.06%) is an outperformer after a solid earnings report, but other semiconductor names, including NVIDIA (NVDA 178.58, -4.46, -2.44%), now trade mostly lower, with the PHLX Semiconductor Index (-3.2%) widening its retreat. Bloomberg recently reported that the Trump administration is drafting rules to require U.S. approval for global NVIDIA chip sales. 

Meanwhile, the consumer discretionary sector (-0.3%) trades just modestly lower, with support from Expedia Group (EXPE 244.82, +23.56, +10.65%) and Booking Holdings (BKNG 4617.40, +363.82, +8.55%) following a report from The Information that OpenAI is dialing back plans to integrate direct travel booking functionality into ChatGPT.

Outside of the S&P 500, the Russell (-2.7%) and S&P Mid Cap 400 (-2.0%) lag as the market displays a clear risk-off positioning today. 

With no end in sight to the conflict in Iran, investors are beginning to harbor concerns that rising oil prices could weigh on margins and the inflation outlook. Today's weakness puts the major averages on track for another lower weekly finish, with the major averages now all sitting in negative year-to-date territory. 

Reviewing today's data:

• Q4 Productivity-Prel 2.8% (Briefing.com consensus 4.0%); Prior was revised to 5.2% from 4.9%, Q4 Unit Labor Costs- Prel 2.8% (Briefing.com consensus 0.2%); Prior was revised to -1.8% from -1.9%
  • The key takeaway from the report is that the productivity increase itself was pretty solid, yet that consideration was offset by the comparable jump in unit labor costs that aren't going to help ease concerns about sticky inflation pressures.
• Weekly Initial Claims 213K (Briefing.com consensus 216K); Prior was revised to 213K from 212K, Weekly Continuing Claims 1.868 mln; Prior was revised to 1.822 mln from 1.833 mln
  • The key takeaway from the report will be the continuing low level of initial jobless claims, which connotes a labor market that is slow to fire employees.
• January Import Prices 0.2%; Prior was revised to 0.2% from 0.1%
• January Import Prices ex-oil 0.5%; Prior was revised to 0.2% from 0.4%
• January Export Prices 0.6%; Prior was revised to 0.6% from 0.3%
• January Export Prices ex-ag. 0.7%; Prior was revised to 0.7% from 0.3%