Mid-day: Mega-caps outperform while S&P 500 faces technical resistance

The S&P 500 is up 0.4% in midday action, extending its rebound rally to a fourth straight session amid leadership from the mega-caps. The Nasdaq Composite outperforms with a 1.3% gain while the Dow Jones Industrial Average (unchanged) and Russell 2000 (+0.1%) trade little changed.

Starting with geopolitics, hopes for a Russia-Ukraine ceasefire agreement have been tempered while Chinese state media relayed stubborn-minded rhetoric out of President Xi’s phone conversation with President Biden. Crude futures remain elevated above $100.00 per barrel ($102.84, +1.19, +1.2%).

In turn, money might be flowing into the mega-caps on the view that they still offer some protection for investors (with more reasonable valuations) in these volatile conditions driven by geopolitical uncertainty.

The S&P 500 information technology (+1.3%), consumer discretionary (+1.0%), and communication services (+0.8%) sectors are the only sectors trading higher amid the mega-cap gains, while the utilities sector (-0.9%) underperforms with a 0.9% decline.

The outperformance of the mega-caps is better shown by the 1.3% gain in the Vanguard Mega Cap Growth ETF ( MGK 227.10, +2.84), versus the 0.1% decline for the Invesco S&P 500 Equal Weight ETF ( RSP 156.06, -0.11).

The broader market is slowing down from recent gains, but there appears to be a technical factor in play, too. The S&P 500 is currently retesting its 50-day moving average (4432). Moving past the key technical level could give credence to the rebound effort and foster additional gains. This will be a key level to watch.

Separately, FedEx ( FDX 216.02, -11.96, -5.3%) and U.S. Steel ( X 215.75, -12.23, -5.4%) are struggling after providing underwhelming earnings news. FedEx missed EPS estimates on above-consensus revenue and reaffirmed its full-year EPS guidance while U.S. Steel issued downside Q1 EPS guidance.

Reviewing today’s economic data:

  • Existing home sales decreased 7.2% in February to a seasonally adjusted annual rate of 6.02 million (Briefing.com consensus 6.20 million). Total sales in February were down 2.4% from a year ago.
  • The key takeaway from the report is that higher mortgage rates and rising prices weighed on sales in February, resulting in the slowest pace of sales in six months.
  • The Conference Board’s Leading Economic Index increased 0.3% m/m in February following a revised 0.5% decline (from -0.3%) in January.
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