Daily market review
The market had a decent day overall, with mega cap stocks driving much of the early action while the broader market showed some weakness. However, by the end of the day, more stocks joined in the upward moves. The performance of mega cap stocks played a crucial role in today's index performance, with companies like Apple, Amazon.com, NVIDIA, and Tesla leading the way. The Vanguard Mega Cap Growth ETF also experienced a 1.0% increase. The Invesco S&P 500 Equal Weight ETF initially declined but ended the day flat, while the market-cap weighted S&P 500 rose by 0.6% and finished near its highest point of the day, approaching the 4,300 level once again.
Throughout most of the session, market breadth seemed negative, but by the end, advancers and decliners at the NYSE and Nasdaq were almost evenly balanced. The majority of S&P 500 sectors closed with gains, except for real estate and energy, which fell by 0.7% and 0.5%, respectively. The decline in the energy sector was partly due to falling oil prices, as reports suggested that the U.S. and Iran were nearing a new oil enrichment and exports deal, although the White House refuted those reports.
The consumer discretionary sector stood out as the top-performing sector, with a 1.6% increase, boosted by Amazon.com and Tesla. On the other hand, Wynn Resorts and Las Vegas Sands underperformed after being downgraded by Jefferies. Other sectors that performed well included information technology, with a 1.1% increase, and consumer staples, with a 0.8% increase. The information technology sector benefited from strong performances by Apple, Microsoft, and semiconductor components, as indicated by the rise in the PHLX Semiconductor Index.
The Russell 2000 index lagged behind today after showing stronger performance earlier in the week, but it managed to recover from an earlier decline. Despite today's loss, it remains the best-performing index of the week, with a 2.7% gain.
Market participants also responded to the weekly initial jobless claims report, which revealed the highest level of claims since November 2021, leading to increased interest in the Treasury market. Consequently, the yields on the 2-year and 10-year notes fell by three and seven basis points, respectively. The declining market rates provided additional support for mega caps and other growth stocks.
In terms of economic data, initial jobless claims for the week ending June 3 increased by 28,000 to 261,000, surpassing the consensus estimate of 237,000. Continuing jobless claims for the week ending May 27 decreased by 37,000 to 1.757 million. The increase in initial claims suggests some softening in the labor market, which the Federal Reserve would like to see. However, it's important to note that the current claims levels remain significantly below those seen in past recessions. Wholesale inventories fell by 0.1% in April, slightly better than the expected decline of 0.2%. The weekly EIA Natural Gas Inventories showed a build of 104 bcf compared to 96 bcf in the previous week.
The 10-year Note showed a significant increase of 29/32, resulting in a yield of 3.71%. In terms of market activity, the NYSE saw 1,407 advances and 1,464 declines, with a trading volume of 837 million. The Nasdaq, on the other hand, experienced 2,249 advances and 2,142 declines, with a substantial trading volume of 4.3 billion.
In terms of industry performance, the Consumer Discretionary, Consumer Staples, and Information Technology sectors demonstrated strength, while the Real Estate, Materials, Energy, and Financial sectors appeared weaker.
Several factors were influencing market movements. Firstly, the strength of mega cap stocks played a significant role. Secondly, there was some caution ahead of the release of the May Consumer Price Index and the upcoming Federal Reserve decision next week. Additionally, market participants were analyzing the weekly jobless claims data, which indicated some softening in the labor market. Lastly, falling market rates provided additional support for mega caps and growth stocks.