Stock Market Update

[BRIEFING.COM] The major averages hold sizable gains at midday, building on yesterday's rebound as easing Treasury yields and reduced expectations for a September rate hike provide another source of support for equities. The S&P 500 (+1.1%), Nasdaq Composite (+1.4%), and DJIA (+1.2%) trade near their session highs after steadily extending their gains throughout the morning.

Treasury yields have continued to retreat from the elevated levels that pressured stocks earlier in the week, with the 10-year note yield down five basis points to 4.75%. The move followed comments from Fed Governor Waller that the market interpreted favorably with regard to the September policy outlook. While Waller acknowledged that inflation remains meaningfully above the Fed's 2.00% target and left open the possibility of another rate hike if progress stalls, investors have focused more heavily on his observation that recent data have shown encouraging signs of disinflation. The CME FedWatch Tool now assigns a 49.6% probability to the Fed leaving rates unchanged at its September meeting, up from 36.8% yesterday.

Today's advance is also broad, with ten of the 11 S&P 500 sectors trading higher. Mega-cap stocks are providing considerable leadership, lifting the Vanguard Mega Cap Growth ETF 1.6% and helping the communication services (+1.4%) and consumer discretionary (+1.8%) sectors outperform. Meta Platforms (META 613.74, +20.88, +3.52%) and Tesla (TSLA 381.01, +24.00, +6.72%) have been among the more notable contributors to the strength.

The financials sector (+1.4%) is another standout, with solid gains across several major banking names adding to the broader advance. Robinhood Markets (HOOD 122.93, +15.94, +14.90%) and Coinbase Global (COIN 192.77, +17.81, +10.18%) have surged even more sharply as Bitcoin climbs nearly 5% and moves above $80,000, leaving the two stocks among the strongest-performing S&P 500 components.

The information technology sector (+1.2%) has overcome early semiconductor weakness as a sharp rebound in software stocks provides substantial support. The iShares GS Software ETF is up 3.6%, recovering yesterday's steep decline, with Snowflake (SNOW 373.33, +67.49, +22.07%) surging more than 20% following an impressive earnings beat, while Microsoft (MSFT 511.20, +14.38, +2.89%) trades higher after announcing a significant overhaul of its reporting structure that will consolidate its three existing segments into two: Agents and Infra, and Devices and Consumer.

Semiconductor stocks remain a relative laggard, although the group has recovered considerably from its opening lows. The PHLX Semiconductor Index is now down just 0.2% after falling more than 2% earlier as Broadcom (AVGO 355.52, -11.72, -3.19%) retreats following its earnings report. Broadcom exceeded Q3 earnings and revenue expectations, but the negative reaction appears to reflect elevated expectations surrounding its AI business and Q4 outlook rather than a deterioration in underlying AI demand.

Elsewhere, food stocks remain a notable pocket of weakness even as the broader consumer staples sector (+0.5%) has moved into positive territory. Tyson Foods (TSN 51.88, -3.93, -7.04%) is sharply lower after reducing its FY26 revenue guidance, while The Campbell's Company (CPB 21.56, -2.22, -9.31%) trades even lower following its earnings report and disappointing FY27 guidance.

The materials sector (-0.3%) is the only S&P 500 sector trading lower at midday, underscoring the otherwise widespread nature of today's advance.

Meanwhile, geopolitical headlines have been relatively quiet compared with earlier in the week. WTI crude is up $0.50 (+0.6%) to $91.51 per barrel, but the modest increase has done little to disrupt the broader advance.

Overall, stocks are extending Wednesday's rebound as declining Treasury yields and a less hawkish interpretation of the September policy outlook ease two of the pressures that weighed on equities earlier in the week. Strong participation across mega-cap stocks, software, financials, and nearly the entire sector lineup has helped the major averages build on their early gains despite lingering weakness in semiconductors.

Reviewing today's data: 

• July Trade Balance -$88.6 bln (Briefing.com consensus -$89.6 bln); Prior was revised to -$71.2 bln from -$73.3 bln
  • The key takeaway from the report is that the widening deficit will be a drag on Q3 GDP growth estimates.
• Q2 Productivity -Rev. 1.4% (Briefing.com consensus 1.4%); Prior 1.4%, Q2 Unit Labor Costs-Rev. 1.2% (Briefing.com consensus 1.3%); Prior 1.3%
  • The key takeaway from the report is that the downtick in unit labor costs from the advance estimate helped keep inflation concerns in check.
• Weekly Initial Claims 206K (Briefing.com consensus 205K); Prior was revised to 204K from 203K, Weekly Continuing Claims 1.779 mln; Prior was revised to 1.771 mln from 1.778 mln
  • The key takeaway from the report is that the low level of initial jobless claims continues to connote a low-firing environment.
• August S&P Global U.S. Services PMI - Final 56.5; Prior 56.8
• August ISM Non-Manufacturing Index 55.4% (Briefing.com consensus 54.1%); Prior 54.1%
  • The key takeaway from the report is that it shows services organizations haven't seen any relief in the prices they are paying for materials and services. That invites the risk of pass-through to customers and sustained inflation issues.