Stock Market Update

[BRIEFING.COM] The S&P 500 (+0.5%), Nasdaq Composite (+0.7%), and DJIA (-0.1%) remain mostly higher shortly after midday, though stocks have given back some of their early strength that saw the S&P 500 notch a fresh record intraday high and cross the 7,800 mark for the first time.

Stocks enjoyed an opening rally as another encouraging inflation report and lower oil prices provided a favorable backdrop. July PPI was unchanged (Briefing.com consensus: 0.1%), while core PPI increased 0.2% (Briefing.com consensus: 0.3%), leaving both measures slightly below expectations despite modest upward revisions to the prior month's readings. Coming on the heels of yesterday's in-line CPI report, the softer producer-price data further reduced expectations for additional Fed tightening. The probability of a 25-basis-point rate hike in September has fallen to 34.4% from 55.0% a week ago, according to the CME FedWatch tool.

The friendlier policy outlook saw stocks open broadly higher, with solid leadership from mega-cap and technology names. The information technology sector (+1.0%) is among the market's leaders, supported by a 2.0% surge in the PHLX Semiconductor Index. Memory names in particular are rallying following positive developments out of Sandisk's (SNDK 1551.82, +207.53, +15.44%) investor day.

Super Micro Computer (SMCI 39.71, +2.10, +5.58%) continues to rally after yesterday's post-earnings surge, while weakness in Cisco (CSCO 112.46, -11.42, -9.22%) following a beat-and-raise earnings report of its own weighs heavily on the DJIA.

Mega-cap technology stocks elsewhere are also outperforming after a weaker showing yesterday. Meta Platforms (META 588.38, +9.53, +1.65%) and Tesla (TSLA 336.02, +8.51, +2.60%) are standouts, and the Vanguard Mega Cap Growth ETF is up 0.9%. While the communication services sector (+1.1%) remains firmly higher, with Netflix (NFLX 77.22, +3.01, +4.06%) contributing a solid gain, the consumer discretionary sector (+0.1%) has given back the bulk of its early advance as crude oil has narrowed its losses for the day.

Crude oil is currently down $1.35 (-1.6%) to $81.92 per barrel after moving toward the $80 per barrel mark earlier in the session, though the early retreat was without a headline catalyst. The energy sector (-0.3%) is a laggard, while the materials (-0.6%) and industrials (-0.3%) sectors also trade lower.

Outside the S&P 500, the Russell 2000 (+0.1%) and S&P MidCap 400 (+0.1%) have also surrendered the bulk of their early strength.

Still, the S&P 500 and Nasdaq remain solidly higher as the combination of softer inflation data and lower oil prices keeps the broader backdrop supportive. The pullback from the opening highs has been orderly so far, with strength in mega-cap technology and semiconductor stocks helping the major averages retain much of their gains.

Reviewing today's data:

• July PPI 0.0% (Briefing.com consensus 0.1%); Prior was revised to -0.1% from -0.3%, July Core PPI 0.2% (Briefing.com consensus 0.3%); Prior was revised to 0.4% from 0.2%
  • The key takeaway from the report is that, like the CPI, it was devoid of "new" inflation-baked surprises. Headline and core readings trended in the right direction of disinflation, which is an appeasement for today's trading dynamic, but of course the inflation rates themselves remain on the high side and need to come down much more to appease inflation hawks.
• Weekly Initial Claims 209K (Briefing.com consensus 205K); Prior was revised to 200K from 199K, Weekly Continuing Claims 1.777 mln; Prior was revised to 1.799 mln from 1.801 mln
  • The key takeaway from the report is the 4-week moving average for initial claims running below 200,000 (currently 199,000), which is an historically low number consistent with a labor market that is light on layoff activity.