Stock Market Update

[BRIEFING.COM] The major averages are firmly higher at midday, bouncing back from yesterday's post-FOMC selloff as lower crude oil prices and Treasury yields provide some relief following three consecutive losing sessions. The S&P 500 (+1.1%) has reclaimed the 7,600 level and moved back above its 50-day moving average (7,614.9), while the Nasdaq Composite (+1.6%) leads and the DJIA (+0.7%) also holds a solid gain.

Today's advance has the characteristics of a broad rebound, with advancers outpacing decliners by nearly 3-to-1 at both the NYSE and Nasdaq. The Russell 2000 (+1.1%) and S&P Mid Cap 400 (+0.9%) are also participating, while the CBOE Volatility Index is down 11.9% to 15.60. Still, AI and mega-cap stocks have returned to the driver's seat.

The information technology sector (+2.1%) leads the sector standings, paced by a 3.0% gain in the PHLX Semiconductor Index. Intel (INTC 110.91, +9.86, +9.76%) is extending yesterday's sharp advance and Advanced Micro Devices (AMD 549.47, +36.97, +7.21%) is another standout as semiconductor stocks rally despite OpenAI's disclosure of six AI safety incidents, suggesting the recent safety-related headlines have done little to temper enthusiasm for the AI trade. Arm Holdings plc (ARM 262.88, +18.90, +7.74%) is also sharply higher after CEO Rene Haas told CNBC that he is confident the company can secure enough supply to meet roughly $2 billion in customer demand.

Software stocks are participating as well, leaving the iShares GS Software ETF up 0.8%, with Oracle (ORCL 150.79, +7.63, +5.33%) and Workday (WDAY 197.58, +9.82, +5.23%) among the notable individual gainers.

Mega-cap stocks elsewhere trade higher, with all seven Magnificent Seven names sporting gains and the Vanguard Mega Cap Growth ETF up 1.5%. That strength has helped the consumer discretionary sector (+1.6%) outperform, while lower Treasury yields have provided an additional boost to rate-sensitive areas such as homebuilders. The iShares U.S. Home Construction ETF is up 0.8%.

The industrials sector (+0.4%) is also benefiting from strength tied to the AI infrastructure buildout. Generac (GNRC 211.67, +36.56, +20.88%) is the best-performing S&P 500 component after announcing a long-term supply agreement with Amazon (AMZN 251.30, +5.34, +2.17%) for backup generators used at Amazon data centers, along with a warrant allowing Amazon to acquire up to roughly 1.7 million Generac shares. Caterpillar (CAT 800.71, +17.99, +2.30%) is another notable industrial gainer.

Meanwhile, the utilities sector (+0.9%) is a relative outperformer as Treasury yields retreat.

The improvement in rates has coincided with another pullback in crude oil. WTI crude is down $0.52 (-0.5%) to $101.91 per barrel, which is now well off its lowest levels of the session. Oil came under pressure after Axios reported that President Trump is expected to meet with Gulf leaders next week to discuss next steps in the conflict with Iran, following his comment yesterday evening that the U.S. is "hopefully toward the end of the war with Iran." The energy sector (+0.1%) has consequently lagged the broader advance after spending most of the morning in negative territory.

Elsewhere, the financials sector (+0.1%) has edged above its flat line but remains a relative underperformer as banking stocks continue to face some pressure following yesterday's rate hike.

Today's gains come after Wednesday's initially positive session reversed sharply during Fed Chair Kevin Warsh's press conference. The FOMC's 25-basis-point rate hike itself generated little immediate reaction, but Mr. Warsh's emphasis on persistent above-target inflation raised expectations that additional tightening could follow. The decline in oil and Treasury yields today has eased some of that pressure, helping put the S&P 500 in position to snap its three-day losing streak.

Reviewing today's data:

• Housing starts declined 2.6% month-over-month in August to a seasonally adjusted annual rate of 1.275 million (Briefing.com consensus: 1.325 million), although single-unit starts were up 7.6%. Building permits declined 2.7% month-over-month to a seasonally adjusted annual rate of 1.394 million (Briefing.com consensus: 1.410 million).
  • The key takeaway from the report is that building permits—a leading indicator—were flat to down across all regions for single-unit dwellings.
• Aug Building Permits 1394K (Briefing.com consensus 1410K; Prior 1433K)
• Initial jobless claims for the week ending September 12 decreased by 10,000 to 196,000 (Briefing.com consensus: 209,000). Continuing jobless claims for the week ending September 5 decreased by 39,000 to 1.730 million.
  • The key takeaway from the report is the remarkably low level of initial jobless claims, which suggests a low-firing environment.
• Sep Philadelphia Fed Index 37.8 (Briefing.com consensus 35.0; Prior 47.4)
• Aug Pending Home Sales 0.3% (Briefing.com consensus 0.5%; Prior -2.6%)
• 09/12 EIA Natural Gas Inventories +44 bcf (Prior +40 bcf)