Stock Market Update

[BRIEFING.COM] The S&P 500 (+0.5%) and Nasdaq Composite (+0.9%) hold solid gains at midday, supported by continued strength in mega-cap technology stocks, while weaker participation across the broader market has left the DJIA (-0.1%) slightly lower.

Stocks received an early boost from slightly cooler-than-expected inflation readings in the August Personal Income and Spending report. The PCE Price Index increased 0.3% month-over-month (Briefing.com consensus: 0.4%), while the core PCE Price Index rose 0.2% (Briefing.com consensus: 0.3%). Expectations for the Fed to leave rates unchanged at the October FOMC meeting have increased in response, with the CME FedWatch Tool now assigning a 60.7% probability to that outcome, up from 49.1% yesterday and 29.1% a week ago.

The inflation data has done little to ease pressure in the Treasury market, however, with the 10-year note yield up three basis points to 5.29%.

Meanwhile, the positive breadth seen shortly after the open has faded. The Russell 2000 (-0.1%) and S&P Mid Cap 400 (-0.1%) have also slipped into negative territory, reinforcing the relatively narrow nature of today's advance.

Mega-cap stocks remain the primary source of support. The Vanguard Mega Cap Growth ETF is up 0.9%, with Alphabet (GOOG 347.60, +10.28, +3.05%) and Apple (AAPL 336.57, +7.17, +2.18%) among the standout gainers. Their strength has helped propel the communication services (+1.8%) and information technology (+1.1%) sectors to the top of the standings. Notably, those are currently the only two S&P 500 sectors on pace to finish September with month-to-date gains.

Strength within the technology space is not uniform. NVIDIA (NVDA 230.29, +3.08, +1.35%) is among the mega-cap gainers, but semiconductor stocks are mixed overall, leaving the PHLX Semiconductor Index down 0.3%. Software stocks are faring considerably better, with the iShares Expanded Tech-Software Sector ETF (IGV) up 1.8%.

There are also several notable individual movers within the broader technology landscape. Gen Digital (GEN 22.32, +1.48, +7.07%) is the best-performing S&P 500 component, while Hewlett Packard Enterprise (HPE 65.10, +3.60, +5.86%) is sharply higher after raising its Networking outlook and increasing its expected Juniper cost synergies ahead of its Networking Investor Day. Conversely, Jabil (JBL 293.77, -25.07, -7.86%) is under pressure despite better-than-expected Q4 results and an upbeat outlook, as elevated expectations surrounding its AI-driven growth prospects appear to have tempered the response.

Three other S&P 500 sectors join the two growth-oriented groups in positive territory. The energy sector (+0.8%) is among the standouts as crude oil recoups some of yesterday's decline, rising $2.03 (+2.3%) to $91.41 per barrel. The consumer discretionary sector (+0.6%) also outperforms, helped by strength in several of its larger components.

Losses among the six declining sectors remain relatively modest, although they have widened as the session has progressed. The real estate sector (-0.8%) sits at the bottom of the standings, followed by the consumer staples (-0.7%) and financials (-0.6%) sectors, with several components from those groups weighing on the price-weighted DJIA.

Overall, today's index-level gains continue to obscure a more mixed showing beneath the surface. Cooler inflation data and strong mega-cap leadership have supported the S&P 500 and Nasdaq, but fading breadth, weakness among small- and mid-cap stocks, and a 10-year yield holding near 5.30% have kept the broader market from participating more fully.

Reviewing today's data:

• 09/26 MBA Mortgage Applications Index -6.0% (Prior -1.5%)
• Sep ADP Employment Change 90K (Briefing.com consensus 58K; Prior 36K revised from 38K)
• On a year-over-year basis, the PCE Price Index was up 3.4%, unchanged from July, which was revised down from 3.7%; and the core PCE Price Index was up 3.0%, also unchanged from July, which was revised down from 3.3%.
  • The key takeaway, though, is that PCE inflation, no matter how you slice it, is still far above the Fed's 2.0% inflation target, so the idea that the Fed may raise rates again before the end of the year is bound to remain a lively one. Another important takeaway is that spending outpaced income growth, which contributed to the decline in the personal savings rate.
• Aug Personal Spending 0.9% (Briefing.com consensus 0.7%; Prior 0.1% revised from 0.2%)
• Aug PCE Prices 0.3% (Briefing.com consensus 0.4%; Prior 0.1% revised from 0.2%)
• Aug PCE Prices - Core 0.2% (Briefing.com consensus 0.3%; Prior 0.1% revised from 0.2%)
• Q2 GDP - Third Estimate 2.2% (Briefing.com consensus 1.5%; Prior 1.5%)
• Q2 GDP Deflator - Third Estimate 6.1% (Briefing.com consensus 6.3%; Prior 6.4%)
• Aug Adv. Retail Inventories 0.3% (Prior 0.8% revised from 0.7%)
• Aug Adv. Intl. Trade in Goods -$132.6B (Prior -$118.9B revised from -$118.8B)
• Aug Adv. Wholesale Inventories 0.7% (Prior 1.3%)
• Sep Chicago PMI 58.8 (Briefing.com consensus 53.2; Prior 47.1)
• 09/26 EIA Crude Oil Inventories +0.922M (Prior +2.97M)