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Market Snapshot

https://www.briefing.com/stock-market-update

Dow 32120.30 +191.66 (0.60%)
Nasdaq 11434.73 +170.29 (1.51%)
SP 500 3978.74 +37.25 (0.95%)
10-yr Note
NYSE Adv 2582 Dec 700 Vol 1.02 bln
Nasdaq Adv 3187 Dec 1434 Vol 4.4 bln

Industry Watch
Strong: Consumer Discretionary, Energy, Information Technology, Communication Services
Weak: Utilities, Industrials

Moving the Market

-- Growth concerns

-- Efforts to rebound from oversold condition

-- Speculation that month-end rebalancing will work in favor of stocks

-- Relief bid following release of FOMC Minutes

Closing Summary
25-May-22 16:25 ET
Dow +191.66 at 32120.30, Nasdaq +170.29 at 11434.73, S&P +37.25 at 3978.74

[BRIEFING.COM] The stock market made a rebound attempt today. There were some fits and starts in that attempt, but ultimately it was successful, gaining some steam after the release of the Minutes for the May FOMC meeting. Each of the major indices ended the day higher, yet the performance edge clearly went to the small-cap and mid-cap stocks over their larger peers.

The Russell 2000 increased 2.0% and the S&P Midcap 400 Index increased 1.9% versus gains of 1.0% for the S&P 500 and 0.6% for the Dow Jones Industrial Average. Some speculative trading action and short-covering activity bolstered the performance of the smaller-capitalization stocks, but to be fair, today's session had a predominately rebound-minded bias that saw the majority of stocks attract some buy-the-dip interest.

That interest was evident in the advance-decline line, which favored advancing issues by a nearly 4-to-1 margin at the NYSE and a better than 2-to-1 margin at the Nasdaq.

Notwithstanding the broad-based gains, the stock market did not exorcise its fundamental demons.

Growth concerns continued to persist, evidenced by some weaker-than-expected durable goods orders for April, no growth in weekly mortgage purchase applications, luxury homebuilder Toll Brothers (TOL 48.09, +3.55, +8.0%) acknowledging that demand has moderated over the past month, and Dick's Sporting Goods (DKS 78.14, +6.90, +9.7%) issuing FY23 EPS guidance well below the consensus estimate due to the expected impact of evolving macroeconomic conditions.

Those concerns, though, were set aside as market participants looked intent on forcing a rebound effort. That intention was most evident in the consumer discretionary sector (+2.8%), which has been the hardest-hit sector this year and which shook off the warning from Dick's Sporting Goods, unlike past sessions when it reacted decidedly negative to disappointing guidance.

Most sectors ended today higher. The lone laggards were the utilities (-0.06%) and industrials (-0.02%) sectors. The energy (+2.0%) and information technology (+1.2%) sectors fell in line behind the consumer discretionary sector as the best-performing sectors. Gains for the remaining sectors ranged from 0.04% to 0.9%.

Late in the day, the S&P 500 flirted with 4,000, stopping just short at 3999.33. The latter marked the high of the day and it was logged roughly an hour after the release of the FOMC Minutes at 2:00 p.m. ET. Market participants were presumably heartened by the notion that Fed members want to move expeditiously to the neutral rate in a bid to quell inflation pressures, and that moving there quickly could allow the Fed possibly to pause its rate hikes later in the year to assess the effects of policy firming.

It is highly debatable that a neutral rate in the neighborhood of 2.50% will be high enough to quell inflation pressures, but it was just enough of a carrot to create some trading excitement in the afternoon session. Notably, the 2-yr note yield barely budged after the release of the minutes, standing its ground at 2.50%. Meanwhile, stocks finished off their highs on some renewed selling interest over the last 45 minutes of trading.

Reviewing today's economic data:

The conditions for durable goods orders proved to be reasonably good in April, if not altogether as strong as expected. New orders for durable goods increased 0.4% month-over-month (Briefing.com consensus 0.6%) while new orders for durable goods, excluding transportation, rose 0.3% month-over-month (Briefing.com consensus 0.6%).
The key takeaway from the report is that business spending continued to increase. That view was embedded in the 0.3% increase in nondefense capital goods orders, excluding aircraft, which followed on the heels of a 1.1% increase in March.
Total applications declined 1.2% week-over-week, with purchase applications flat and refinancing applications down 2.0%

Looking ahead, market participants will receive the Second Estimate for Q1 GDP, Weekly Initial and Continuing Jobless Claims, April Pending Home Sales, and weekly EIA Natural Gas Inventories data on Thursday.

Dow Jones Industrial Average -11.5% YTD
S&P 500 -16.5% YTD
S&P 400 -14.6% YTD
Russell 2000 -19.9% YTD
Nasdaq Composite -26.9% YTD

Assessing the meaning of the Minutes
25-May-22 15:30 ET
Dow +287.80 at 32216.44, Nasdaq +221.57 at 11486.01, S&P +51.79 at 3993.28

[BRIEFING.COM] The stock market went into a higher gear following the release of the FOMC Minutes for the May meeting, which conveyed a notion that members want to move expeditiously to get to the neutral rate.

The neutral rate of course is a moving target. You kind of know it when the data suggest you hit it, but for now it sits in the neighborhood of 2.50%. The target range for the fed funds rate is currently 0.75-1.00%, and Fed Chair Powell has already intimated that 50 basis point rate hikes are likely at the June and July FOMC meetings. That would leave things at 1.75-2.00% if that's how it played out, so the arrival at "neutral" could come as early as the September FOMC meeting if the Fed stayed on a similar tightening course.

There are a few considerations that likely helped drive the post-Minutes upswing:

Market participants like the idea at this point that the Fed wants to get to the neutral rate expeditiously. Doing so presumably would help cool inflation pressures sooner rather than later (it is highly debatable that 2.50% is the bogey for an inflation rate that still sits above 8.0%).
Market participants also like the idea that the Fed could be hitting the "pause" button on rate hikes before the year is done. That view was borne out of the indication that many participants judged that an expeditious removal of policy accommodation would leave the Committee "well positioned later this year" to assess the effects of policy firming.

These ideas will certainly be put to the test in coming months, but for a market in an oversold condition, and desperate to have a ray of hope as it relates to future rate hikes, they were enough to generate some excitement that drove the S&P 500 to the threshold of the 4,000 level before being met with resistance.

Strikingly, the 2-yr note sits unchanged at 2.50%, little changed from where it was before the release of the Minutes.
Sectors pull ahead after minutes release
25-May-22 14:55 ET
Dow +171.91 at 32100.55, Nasdaq +186.44 at 11450.88, S&P +40.07 at 3981.56

[BRIEFING.COM] Major indices are all trending higher after the release of the minutes from the May FOMC meeting. The Nasdaq Composite is up 1.5%, the Dow Jones Industrial Average is up 0.4%, and the S&P 500 is up 1.0%.

The Mega-Caps have pulled ahead of the broader market today. Looking at the Vanguard Mega-Cap Growth ETF (MGK 188.16, +2.60, +1.4%) versus the Invesco S&P 500 Equal Weight ETF (RSP 143.78, +1.49, +1.1%) we can see that the mega-caps are leading by a decent spread instead of tracking nearly 1:1 as seen earlier in the session.

Separately, most S&P 500 sectors have shown improvement since the release of the minutes. Most notably, the information technology (+1.2%), consumer discretionary (+2.8%), and communication services (+0.7%) sectors sit near their best levels of the day.

The lone laggards at this point are the utilities (-0.4%) and health care (-0.3%) sectors.
FOMC minutes show participants think 50 bps hike would be appropriate at next couple of meetings
25-May-22 14:30 ET
Dow +78.84 at 32007.48, Nasdaq +134.41 at 11398.85, S&P +27.10 at 3968.59

[BRIEFING.COM] The major averages jostled around, but ultimately stand modestly higher following the release of the FOMC's May policy meeting minutes. The benchmark S&P 500 (+0.69%) is firmly in second place.

Interestingly, most participants judged that 50 basis point increases in the target range would likely be appropriate at the next couple of meetings.

In addition, many participants judged that expediting the removal of policy accommodation would leave the Committee well positioned later this year to assess the effects of policy firming and the extent to which economic developments warranted policy adjustments.

Among other key excerpts from the minutes, a number of participants observed that recent monthly data might suggest that overall price pressures may no longer be worsening. Also, all participants supported plans to reduce the size of the balance sheet.
Gold lower on Wednesday ahead of FOMC minutes
25-May-22 13:55 ET
Dow -37.40 at 31891.24, Nasdaq +86.62 at 11351.06, S&P +10.10 at 3951.59

[BRIEFING.COM] We're little changed in the last half hour, the tech-heavy Nasdaq Composite (+0.77%) still leading the way ahead of the FOMC's May policy meeting minutes at the top of the hour.

Gold futures settled $19.10 lower (-1%) to $1,846.30/oz its steepest percentage decline in two weeks, pressured in part by a modestly higher dollar.

Meanwhile, the U.S. Dollar Index is up approx. +0.4% to $102.26.