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There was little question yesterday that both the stock market and Treasury market felt a strong measure of relief following the better-than-feared December Consumer Price Index. Treasury yields shot lower and stock prices screamed higher. There was also a lot of energy around the much better-than-expected results from some of the nation's largest financial institutions.
It was a really good day for investors plain and simple. In fact, it was the best day for the S&P 500, Nasdaq Composite, and Russell 2000 since November 6 (day after the election). The only blemish, technically speaking, is that the market cap-weighted S&P 500 couldn't manage a close above its 50-day moving average (now 5,962).
Accordingly, it can be said that the tone of the stock market has improved, but that the short-term trend still hasn't shifted in a meaningful way. Perhaps today will be the day to lay claim to such a shift, yet follow-through interest thus far is being held in reserve.
Currently, the S&P 500 futures are up seven points and are trading 0.2% below fair value, the Nasdaq 100 futures are up 69 points and are trading 0.4% above fair value, and the Dow Jones Industrial Average futures are down 134 points and are trading 0.3% below fair value.
There is a good bit of news to digest this morning, including another batch of better-than-expected earnings results from the likes of Bank of America (BAC), Morgan Stanley (MS), U.S. Bancorp (USB), and PNC Financial Services (PNC). Separately, Taiwan Semiconductor Manufacturing Co. (TSM) is another earnings standout, whereas Dow component UnitedHealth Group (UNH) has been tripped up by Q4 results that included a slight miss on the top line and a pickup in its 2024 medical care ratio to 85.5% from 83.2% in 2023.
UNH is the primary reason for the underperformance of the Dow Jones Industrial Average futures.
Other items drawing some extra attention include a Washington Post report that President-elect Trump is mulling an executive order that will delay the ban on TikTok, a Bloomberg report that Israeli Prime Minister Netanyahu is accusing Hamas of making last-minute demands that could risk completion of the ceasefire deal, and Treasury Secretary nominee Scott Bessent's confirmation hearing at 10:30 a.m. ET.
Then, of course, there is this morning's slate of economic data.
- Retail sales increased 0.4% month-over-month in December (Briefing.com consensus 0.5%) following an upwardly revised 0.8% increase (from 0.7%) in November. Excluding autos, retail sales also increased 0.4% month-over-month (Briefing.com consensus 0.5%) following an unrevised 0.2% increase in November.
- The key takeaway from the report is that retail sales, which are not adjusted for price changes, were more subdued than expected in December, suggesting consumers spent in a more considerate manner. Importantly, though, they remained inclined to spend.
- Initial jobless claims for the week ending January 11 increased by 14,000 to 217,000 (Briefing.com consensus 212,000). Continuing jobless claims for the week ending January 4 decreased by 18,000 to 1.859 million.
- The key takeaway from the report is that there was nothing disruptive about it in terms of the market's understanding that the labor market, overall, continues to be in pretty good shape.
- The January Philadelphia Fed Index soared to 44.3 (Briefing.com consensus -6.0) from an upwardly revised -10.9 (from -16.4) in December. The dividing line between expansion and contraction is 0.0.
- The key takeaway from the report is that there was a marked increase in nearly every index component, including new orders (to 42.9 from -3.6) and prices paid (to 31.9 from 26.6), that is indicative of improved demand.
- December import prices were up 0.1% month-over-month and up 2.2% year-over-year. Export prices were up 0.3% month-over-month and up 1.8% year-over-year.
- The key takeaway from the report is that import and export prices are tracking in a more subdued manner that is helping to ease some of the market's inflation angst.
Treasury yields had been drifting higher in the overnight trade, but came in some in the wake of this morning's data. The 2-yr note yield is up three basis points to 4.29% and the 10-yr note yield is up two basis points to 4.67%. The trading tone in the Treasury market will continue to factor prominently in any shift in tone and short-term trend in the stock market.
