Stock Market Update

[BRIEFING.COM] After a choppy start that featured another bout of volatility across semiconductor stocks, the market has found its footing, with the S&P 500 (+0.4%), Nasdaq Composite (+0.3%), and DJIA (+0.8%) trading modestly higher just after midday.

A key catalyst behind today's strength has been another retreat in both oil prices and Treasury yields. Crude oil is down $2.61 (-3.6%) to $70.60 per barrel after briefly falling below the $70 mark earlier in the session, while the 10-year note yield is down eight basis points to 4.42%. The moves come as investors continue to react favorably to easing geopolitical tensions in the Middle East and improving traffic through the Strait of Hormuz.

The decline in oil prices and yields has sparked broad buying across several rate- and energy-sensitive areas of the market. The consumer discretionary sector (+2.3%) holds the widest gain, supported by strong advances in homebuilders, travel-related names, and other consumer-oriented stocks. PulteGroup (PHM 137.83, +11.28, +8.91%) and D.R. Horton (DHI 167.71, +11.63, +7.45%) are among the standout performers, helping lift the iShares U.S. Home Construction ETF 6.6% higher, while Expedia Group (EXPE 268.22, +23.15, +9.45%) and other travel-related names also trade firmly higher.

The industrials sector (+1.6%) is posting similar strength. Building and construction-related names such as Builders FirstSource (BLDR 85.17, +8.44, +11.00%), Stanley Black & Decker (SWK 89.10, +5.28, +6.31%), and Masco (MAS 77.58, +4.37, +5.97%) are among the leaders as investors rotate into groups that stand to benefit from lower financing costs and easing energy prices.

Defensive sectors are also participating, with the consumer staples (+0.8%), health care (+0.8%), and utilities (+0.4%) sectors all posting gains and continuing to rank among this week's best-performing groups.

The strength extends well beyond a handful of sectors. The S&P 500 Equal Weight Index (+1.1%) comfortably outperforms the market-weighted S&P 500 (+0.4%), while the Russell 2000 (+1.2%) and S&P Mid Cap 400 (+1.1%) also outperform.

Meanwhile, semiconductor stocks remain a notable exception. The PHLX Semiconductor Index (-0.5%) has swung between gains and losses throughout the morning and currently sits modestly lower after yesterday's sharp retreat. The information technology sector (-0.1%) is little changed despite the weakness in semiconductor stocks, supported by gains in several of its largest components.

However, strength in mega-cap names has waned considerably over the last half hour. The Vanguard Mega Cap Growth ETF is up 0.4% after holding a gain that approached 1.0%.

The pullback has pushed the major averages off their session highs, though they remain higher across the board. The energy sector (-2.0%) is a laggard amid the slide in oil prices, while the real estate (-0.4%) and financials (-0.1%) sectors hold more modest losses.

While an improving macro backdrop is driving much of today's strength, a handful of stock-specific earnings reactions are also drawing attention. FedEx (FDX 312.94, -4.30, -1.36%) moves lower in its first earnings release since the June 1 spinoff of FedEx Freight (FDXF 159.56, -6.91, -4.15%), while Cerebras Systems (CBRS 190.55, -36.17, -15.95%) sinks sharply after reporting its first earnings results as a public company.

Today's action suggests investors are becoming increasingly comfortable looking beyond the recent volatility in semiconductor stocks as improving conditions elsewhere in the market support a broader advance. Even so, Micron's (MU 1041.39, -10.38, -0.99%)earnings release after the close looms as the next major catalyst for the semiconductor group and could determine whether yesterday's selloff ultimately proves to be another buying opportunity.

Reviewing today's data:

• Weekly MBA Mortgage Applications Index 1.0%; Prior -3.8%
• Q1 Current Account Balance -$226.8 bln (Briefing.com consensus -$237.5 bln); Prior was revised to -$221.1 bln from -$190.7 bln
• May New Home Sales 580K (Briefing.com consensus 627K); Prior was revised to 626K from 622K
  • The key takeaway from the report is that new home sales in May were pressured by affordability constraints tied to rising mortgage rates. Notably, the West region, which features the highest-priced homes, saw the biggest hit to sales month-over-month; however, there was also weakness in the more affordable South region, which is the nation's largest homebuilding market.