Market Overview
The S&P 500 Index ($SPX) (SPY) increased by +0.84% on Thursday. The Dow Jones Industrials Index ($DOWI) (DIA) saw a rise of +0.77%, while the Nasdaq 100 Index ($IUXX) (QQQ) climbed by +0.93%. Additionally, September E-mini S&P futures (ESU25) rose +0.84%, and September E-mini Nasdaq futures (NQU25) increased by +0.92%.
Bond Market Influence
Stock indices gained traction on Thursday with a drop in bond yields, fueled by expectations that the Federal Reserve may cut interest rates as soon as this month. Recent weak labor market data contributed to the decline in bond yields, elevating speculation of a rate cut during the September 16-17 FOMC meeting. The yield on the 10-year T-note fell by -5 basis points to reach a four-month low, while the futures market shows a likelihood of a Fed rate cut this month rising to 97%, compared to 95% on Wednesday and 88% last Friday.
Sector Performance and Economic Indicators
Stock gains were further supported by positive signals from the service sector, with the August ISM services index expanding at its fastest rate in six months. However, chip stocks faced pressure from a -4% decline in Texas Instruments, following a cautionary statement from CFO Lizardi about the slow recovery in chip demand. Additionally, concerns about the independence of the Federal Reserve arose after Stephen Miran’s statements during his Senate confirmation hearing regarding his roles.
Labor Market Data
August’s ADP employment change showed an increase of +54,000, below the expected +68,000. Initial weekly unemployment claims in the U.S. rose by +8,000, reaching a 10-week high of 237,000, indicating a labor market weaker than the anticipated 230,000. In contrast, nonfarm productivity for Q2 was revised upward to +3.3%, surpassing expectations of +2.7%, while unit labor costs were revised down to +1.0% from +1.6%, below the projected +1.2%.
Global Market Reactions and Economic Forecasts
International stock markets exhibited mixed performances, with the Euro Stoxx 50 up by +0.41%, while China’s Shanghai Composite endured a drop of -1.25%. In the U.S., emphasis remains on the upcoming economic reports, particularly nonfarm payrolls expected to rise by +75,000 and a projected slight increase in the unemployment rate. Meanwhile, a federal appeals court has ruled that President Trump overstepped his authority by imposing tariffs without Congressional approval.
Corporate News and Movements
U.S. stocks benefited as all ‘Magnificent Seven’ stocks closed higher, with Amazon leading the charge with a +4.3% increase. Homebuilders advanced in light of lower T-note yields, while Hewlett Packard Enterprise rose by +1.5% after reporting stronger-than-expected Q3 revenue. Conversely, Salesforce led the Dow losses with a drop of nearly -5% after forecasting lower-than-expected Q3 revenue.
Sector Updates and Additional Insights
Health insurance stocks took a hit following comments from Elevance Health executives, with significant declines noted in shares of Elevance, Centene, and Molina Healthcare. Caleres shares fell by -4.8% on disappointing gross margins. Meanwhile, other companies such as Ciena and Credo Technology Group saw substantial increases after exceeding revenue expectations.
