/ June 03
Daily Briefing
*The stock market got hit with a few jabs early on, but once again showed that it has plenty of fight in it, with the mega-cap stocks acting as the enforcer; Meta Platforms (META, +3.6%), which is reportedly planning full, AI-generated ads by 2026, according to The Wall Street Journal, and NVIDIA (NVDA, +1.7%), which remains the go-to AI play, were yesterday’s risk-on standouts;
*The Vanguard Mega-Cap Growth ETF (MGK) advanced +0.9% versus the Invesco S&P 500 Equal-Weighted ETF (RSP), which was up +0.1% for the day;
*The early hits flowed from the weekend news that the U.S. will be doubling the tariff rate for steel and aluminum imports to 50%, effective Wednesday, and China's fighting stance that it was the U.S. that violated the preliminary trade agreement reached in Geneva;
*That combination put the market on its heels, contemplating the potential for higher inflation stemming not only from the tariff increase but also from the potential for ongoing supply chain disruptions;
*The market cap-weighted S&P 500 declined -0.9% shortly after the open but just as quickly started to rebound following the release of a better-than-feared ISM Manufacturing PMI for May at 10:00 a.m. ET and a CNBC report that President Trump and President Xi are likely to speak this week; later, Reuters, citing a U.S. Trade Representative draft letter, carried a report saying the Trump administration is seeking best offers from countries by Wednesday for trade negotiations;
*By and large, it was a one-way trade higher from the time of the ISM report, with the S&P 500 and Nasdaq Composite stairstepping their way to successive highs; both basically closed at their highs for the session;
*Something notable about the move, other than it taking place on relatively light volume, is that it happened at the same time Treasury yields were pressing higher behind selling interest; the turnaround by the stock market, then, may have been helped by some asset reallocation out of bonds and into stocks;
*We would venture a guess that it was also helped by short-covering activity and the squeezing in of sidelined investors sitting on a lot of cash, as the market's continued resilience left them fearful about missing out on further gains;
*Ten S&P 500 sectors finished higher; The energy sector (XLE, +1.2%) was the biggest gainer, aided by a nice pop in oil prices ($62.57, +3.0%) after OPEC+ agreed to raise production by 411,000 barrels per day in July; traders had been worried that the output hike could be much larger;
*The information technology sector (XLK, +0.9%) was second in command today, lending its weight to the broader market along with the communication services sector (XLC, +0.6%); the industrials sector (XLI, -0.2%) was the only sector that gave up some ground;
*Market breadth substantiated the somewhat narrow nature of yesterday’s gains; decliners outpaced advancers by a roughly 5-to-4 margin at the NYSE, while advancers led decliners by a narrow margin at the Nasdaq;