Stock Market Update

[BRIEFING.COM] Stocks have extended their gains into midday, with the S&P 500 (+0.8%), Nasdaq Composite (+1.5%), and DJIA (+0.4%) all moving into positive territory for the week as a strong response to several technology earnings reports drives the advance.

The information technology sector (+3.2%) is the clear standout, with strength extending across both semiconductor and software stocks. NVIDIA (NVDA 229.32, +19.66, +9.38%) is up sharply after another strong earnings report and bullish commentary surrounding the AI buildout, bouncing firmly above its 50-day moving average on the heels of a recent a seven-session losing streak. The PHLX Semiconductor Index (+2.0%) is higher as a result.

Software stocks are performing even better, with the iShares Expanded Tech-Software Sector ETF (+7.0%) surging as several high-profile earnings reports receive positive reactions. Salesforce (CRM 249.47, +43.85, +21.33%) leads both the S&P 500 and DJIA following its results, with encouraging forward demand indicators and expectations for accelerating organic revenue growth in the second half overshadowing a sizable investment-related benefit to quarterly earnings. CrowdStrike (CRWD 222.78, +33.60, +17.76%) is another major post-earnings standout.

The concentrated strength in technology masks a considerably weaker showing across the rest of the market. All ten other S&P 500 sectors trade lower, leaving the S&P 500 Equal Weighted Index (-0.1%) modestly lower despite the solid gain for its market-cap-weighted counterpart. Mega-cap technology strength has nevertheless lifted the Vanguard Mega Cap Growth ETF 1.8%.

Retail stocks are among the weaker pockets. The consumer discretionary sector (-0.9%) is under pressure as Best Buy (BBY 83.20, -4.24, -4.85%) and Burlington Stores (BURL 293.11, -20.88, -6.65%) retreat following their earnings reports, contributing to a 1.6% decline in the SPDR S&P Retail ETF. The consumer staples sector (-1.1%) holds an even wider loss as Hormel Foods (HRL 21.49, -2.22, -9.36%) sinks following its results, leaving it among the worst-performing S&P 500 components.

The communication services sector (-0.7%) is also firmly lower as mega-cap performance outside the information technology sector remains relatively weak. The divergence underscores the rotation back toward technology following several sessions in which other areas of the market had provided more support.

While earnings have dictated much of today's action, attention could shift back toward macroeconomic developments tomorrow when Fed Chair Kevin Warsh delivers his keynote address at the Jackson Hole Symposium. Cleveland Fed President Beth Hammack (voting FOMC member) added to the policy discussion this morning, saying inflation has remained above target for several years and that she believes now is the time for the Fed to act. Still, the CME FedWatch Tool currently assigns a 33.0% probability to a 25-basis-point rate hike at the September FOMC meeting, down from 36.6% yesterday.

Overall, today's headline gains are largely a technology-driven affair, with strong reactions to NVIDIA, Salesforce, and other earnings reports more than offsetting weakness across the other ten S&P 500 sectors. That narrow leadership has been enough to push all three major averages back into positive territory for the week, though tomorrow's Jackson Hole address could provide a broader catalyst for the market.

Reviewing today's data:

• July Adv. Intl. Trade in Goods -$118.8 bln; Prior was revised to -$101.4 bln from -$101.5 bln
• July Adv. Retail Inventories 0.7%; Prior 0.0%
• July Adv. Wholesale Inventories 1.3%; Prior 0.3%
• Weekly Initial Claims 203K (Briefing.com consensus 210K); Prior was revised to 207K from 206K, Weekly Continuing Claims 1.778 mln; Prior was revised to 1.796 mln from 1.799 mln
  • The key takeaway from the report is that initial claims continue hovering just above the 200,000 mark, showing little change in overall layoff activity while continuing claims are just above their lowest level of the year.