Stock Market Update

[BRIEFING.COM] The S&P 500 (-0.1%), Nasdaq Composite (-0.5%), and DJIA (+0.5%) trade in a relatively stable range after heightened volatility across tech and mega-cap stocks resulted in several sharp intraday swings.

Micron (MU 1219.68, +171.18, +16.33%) is back near the top end of its range, though it was subject to choppy trading this morning despite posting a massive beat-and-raise earnings report driven by powerful memory demand. Micron's results were widely viewed as a potential catalyst for the semiconductor group, which has struggled to sustain gains throughout the week.

The PHLX Semiconductor Index (+3.5%) holds a solid gain, but the action has been anything but smooth. The index surged more than 5% out of the gate before turning sharply lower into negative territory, then steadily recovered to trade firmly higher.

Notably, the information technology sector (-0.3%) remains below its baseline despite the intraday improvement across semiconductor stocks. Mega-cap technology names are extending this week's losses, with Apple (AAPL 276.63, -16.45, -5.61%) a particular laggard after announcing price hikes on its products due to rising memory costs.

Weakness across other mega-cap names such as Amazon (AMZN 228.04, -6.24, -2.66%) and Alphabet (GOOG 340.26, -4.78, -1.38%) keeps the consumer discretionary (-1.4%) and communication services (-1.1%) sectors firmly lower as well.

The Vanguard Mega Cap Growth ETF is down 1.2%, and like several other sessions this week, the market-weighted S&P 500 (-0.1%) trails the S&P 500 Equal Weight Index (+0.8%) as a host of cyclical and defensive stocks outperform.

The industrials sector (+2.1%) leads the advance, with Caterpillar (CAT 1051.56, +57.11, +5.74%) giving the DJIA a nice boost amid a solid day for industrial machinery names.

The health care sector (+1.6%) also outperforms as investors continue to rotate into what had been the market's worst-performing sector for much of the year. Bio-Techne (TECH 70.54, +11.66, +19.81%) is the best-performing S&P 500 component after news that the company will be acquired by Merck KGaA (MKKGY 33.83, +1.98, +6.22%) for $73 per share in cash.

Outside of the S&P 500, the Russell 2000 (+0.5%) and S&P Mid Cap 400 (+0.8%) outperform, further reinforcing the notion that not all the money leaving mega-cap stocks is exiting the equity market entirely.

Overall, today's action reinforces the market's ongoing rotation beneath the surface. While mega-cap technology continues to consolidate after an extended run higher, strength across cyclical, defensive, and smaller-cap stocks suggests investors remain committed to equities even as leadership continues to evolve.

Reviewing today's data:

• May Personal Income 0.7% (Briefing.com consensus 0.3%); Prior 0.0%, May Personal Spending 0.7% (Briefing.com consensus 0.3%); Prior was revised to 0.4% from 0.5%, May PCE Prices 0.4% (Briefing.com consensus 0.4%); Prior 0.4%, May PCE Prices - Core 0.3% (Briefing.com consensus 0.3%); Prior was revised to 0.3% from 0.2%
  • The key takeaway from the report is that, first, there weren't any headline shocks for the PCE price indexes. They were in line with expectations, allowing participants to assume that next month's readings will look better given the sharp decline in oil prices. Secondly, real PCE was up 0.3% month-over-month, demonstrating that spending was driven by increased demand and not just higher prices. This will be a nice input for Q2 GDP forecasts.
• Q1 GDP - Third Estimate 2.1% (Briefing.com consensus 1.6%); Prior 1.6%, Q1 GDP Deflator - Third Estimate 3.6% (Briefing.com consensus 3.5%); Prior 3.5%
  • The key takeaway from the report is that Q1 GDP was stronger than originally thought, due primarily to a downward revision to imports, which are a subtraction in GDP calculations.
• May Durable Orders -4.5% (Briefing.com consensus -3.2%); Prior was revised to 8.5% from 7.9%, May Durable Goods 0 ex transportation 1.3% (Briefing.com consensus 0.5%); Prior was revised to 1.4% from 1.1%
  • The key takeaway from the report is that there was a healthy pickup in business spending in May, evidenced by the 1.6% increase in new orders for nondefense capital goods excluding aircraft.
• Weekly Initial Claims 215K (Briefing.com consensus 225K); Prior was revised to 227K from 226K, Weekly Continuing Claims 1.821 mln; Prior was revised to 1.800 mln from 1.810 mln
  • The key takeaway from the report is that initial jobless claims continue to track at low levels, offering a nice cue that suggests the labor market, overall, remains on solid ground.