Mid-day: S&P 500 Remains Near 200-Day Average

The major averages trade in the green at midday with the Nasdaq (+1.1%) holding the lead over the S&P 500 (+0.9%) and Dow (+0.6%).

The first half of the Thursday session has seen a steady push higher that lifted the S&P 500 back above its 200-day moving average (4476), which has been an area of congestion throughout this week. The key indices extended to fresh highs after an Axios reporter tweeted that the chief of staff to Ukraine’s president told him that some progress has been made in cease-fire negotiations, but the gains that developed in the wake of the report have been reversed in recent trade.

Ten sectors display midday gains, but only three groups are up more than 0.7%. Top-weighted technology (+1.6%) is currently jockeying for the lead with materials (+1.5%).

Chipmakers have been at the forefront of the advance in the tech sector, as the PHLX Semiconductor Index rises 3.9% with all of its components taking part in the rally, including top-weighted NVIDIA ( NVDA 279.11, +22.77, +8.9%), which has climbed to a ten-week high. The strength has lifted the tech sector and the SOX Index back into positive territory for the week.

Meanwhile, the materials sector has benefited from a push to fresh 52-week highs in six of its components, including steelmaker Nucor ( NUE 152.65, +5.51, +3.7%) and fertilizer producers like Mosaic ( MOS 68.98, +1.05, +1.6%) and CF Industries ( CF 106.02, +2.41, +2.3%). The materials sector is now up 2.5% for the week and up 5.6% so far in March.

In other commodity-sensitive sectors, energy (+0.5%) holds a modest gain even though crude oil is down $2.43, or 2.1%, at $112.50/bbl.

On the earnings front, travel-related names like Expedia ( EXPE 193.75, +6.81, +3.6%) and Booking.com ( BKNG 2249.15, +89.40, +4.2%) have benefited from above-consensus Q4 results reported by Trip.com ( TCOM 24.14, +0.12, +0.5%). Conversely, homebuilders lag after KB Home ( KBH 34.27, -1.76, -4.9%) missed Q1 expectations and reaffirmed its guidance for FY22 revenue. The iShares Dow Jones US Home Construction ETF ( ITB 62.15, -0.93, -1.5%) is slipping toward its February low (60.02).

Treasuries slumped out of the gate, but they have recovered the bulk of their losses. The 10-yr yield remains higher by three basis points at 2.35% while the 30-yr yield is now just below its flat line at 2.52%.

Reviewing today’s economic data:

  • Initial jobless claims for the week ending March 19 decreased by 28,000 to 187,000 (Briefing.com consensus 210,000), which is the lowest level since September 6, 1969. Continuing jobless claims for the week ending March 12 decreased by 67,000 to 1.350 million, which is the lowest level since January 3, 1970.
  • The key takeaway from the report is that it is consistent with a tight labor market; however, the multi-decade low in initial and continuing claims is going to feed into concerns about a pickup in wage-based inflation pressures that might compel the Fed to take a more aggressive approach in removing its policy accommodation.
  • Durable goods orders for February declined 2.2% month-over-month (Briefing.com consensus -0.5%) after increasing 1.6% in January. Excluding transportation, durable goods orders fell 0.6% month-over-month (Briefing.com consensus +0.5%) after increasing 0.8% in January.
  • The key takeaway from the report is that the weakness follows on the heels of a solid January report despite the effects of the Omicron variant. The downturn likely reflects some natural slowing, meaning it is too early to tell if this is the start of a weaker trend.
  • The IHS Markit Manufacturing PMI increased to 58.5 in the preliminary reading for March from February’s final reading of 57.3.
  • The IHS Markit Services PMI increased to 58.9 in the preliminary reading for March from February’s final reading of 56.5.
  • The Current Account deficit narrowed to $217.90 bln in Q4 from a revised deficit of $219.90 bln (from -$214.80 bln) in Q3.