Daily market review
The stock market began the shortened holiday week on a mostly weaker note. Initially, there was optimism due to President Biden and House Speaker McCarthy reaching a debt ceiling agreement over the weekend. However, uncertainty surrounding the deal's passage in Congress dampened enthusiasm. The House is expected to vote on the agreement on Wednesday night, followed by a Senate vote this weekend.
Ongoing concerns about the economic outlook, combined with the uncertainty around the debt ceiling deal, kept the broader market in check. Today, market participants received the Consumer Confidence Index for May, which showed a decline from the previous month, reflecting persistently negative expectations.
Furthermore, there were concerns about Federal Reserve policy after comments from Richmond Fed President Thomas Barkin, who expressed a high rate forecast that remains unchanged.
Support for the market came from mega-cap stocks and other growth stocks, leading to the outperformance of the S&P 500 and Nasdaq. Although the S&P 500 briefly slipped below the 4,200 level, it managed to close above it.
However, market breadth indicated underlying weakness, with decliners outnumbering advancers. Most sectors of the S&P 500 closed with losses, except for consumer discretionary and information technology, which were the leading sectors. Amazon.com and Tesla contributed to the gains in consumer discretionary, while NVIDIA's announcement of a new AI Supercomputer boosted the information technology sector, propelling its market cap to $1 trillion.
On the downside, consumer staples and energy sectors were the weakest performers of the day.
Treasury yields declined, providing support for mega-cap and growth stocks. The 2-year note yield fell seven basis points to 4.49%, while the 10-year note yield dropped 11 basis points to 3.70%.
Regarding economic data, the FHFA Housing Price Index increased in March, while the S&P Case-Shiller Home Price Index declined in the same month. The Consumer Confidence Index for May dipped, reflecting negative expectations, particularly among consumers over the age of 55.
Looking ahead, Advance Auto will report earnings before the market opens on Wednesday. Economic data scheduled for release includes the weekly MBA Mortgage Index, May Chicago PMI, April job openings, and the May Fed Beige Book.
In the bond market, the 10-year Treasury Note saw a significant gain of 30/32, resulting in a yield of 3.70%. Turning to the stock market, the NYSE had 1,344 advancing stocks and 1,516 declining stocks, with a total trading volume of 923 million. The Nasdaq, on the other hand, experienced 1,996 advancing stocks and 2,480 declining stocks, with a higher trading volume of 4.8 billion.
Taking a closer look at industry performance, the Information Technology, Consumer Discretionary, and Real Estate sectors demonstrated strength. Conversely, the Energy, Consumer Staples, Materials, and Industrials sectors displayed relative weakness.
Several key factors influenced market movement. Firstly, the S&P 500 managed to close above the crucial level of 4,200 last Friday, and despite briefly dipping below that level today, it found support. Secondly, mega-cap stocks and growth stocks continued to exhibit strength, benefiting from the decline in market interest rates. Lastly, market participants reacted to the news that President Biden and House Speaker McCarthy had reached an agreement on the debt ceiling. However, there is still uncertainty regarding the deal's passage in both chambers of Congress, and investors are eagerly awaiting further developments in this regard.