Page One
Sentiment turned quickly for the stock market on the back of last week's inflation reports, sharp decline in Treasury yields, and President Trump's arrival in the Oval Office.
At its low on January 13, the market cap-weighted S&P 500 was down 1.8% in 2025 and down 5.4% from its high on December 6. Now, it is up 3.5% in 2025 and up 5.4% from its low on January 13, a span covering just seven trading sessions. Oh, and lest we forget, it hit a new all-time high (6100.81) in yesterday's trade.
It has been a nice reset for a stock market that had allowed the Treasury market's inflation angst to get under its skin by triggering some valuation angst. However, the stock market is back to where it stated from in a manner of speaking.
On December 6, the forward 12-month P/E ratio for the market cap-weighted S&P 500 was 22.5 -- a 24% premium to its 10-yr average, according to FactSet. Today, it sits at 22.2 -- a 22% premium to the 10-yr average.
If there was valuation angst on December 6, then there is valuation angst on January 23, especially with long-term rates starting to drift higher again. The 10-yr note yield, which hit a post-inauguration low of 4.56%, reached 4.64% earlier today before backing down to its current 4.63%.
That may not be overly jarring for a market that saw 4.80% a little over a week ago, yet the stretched earnings multiple is a headwind running into an earnings reporting period that has high expectations going into next week's results from the likes of Microsoft (MSFT), Meta Platforms (META), Tesla (TSLA), Amazon.com (AMZN), and Apple (AAPL).
There is some natural hesitation today given how far the market has come in just seven trading sessions and tariff uncertainty lurking in the background.
Currently, the S&P 500 futures are down five points and are trading 0.1% below fair value, the Nasdaq 100 futures are down 99 points and are trading 0.4% below fair value, and the Dow Jones Industrial Average futures are up 37 points and are trading fractionally above fair value.
The mixed tone is somewhat indicative of the mixed slate of earnings headlines that featured disappointing guidance from Electronic Arts (EA) and American Airlines (AAL), cautious-sounding guidance from memory chipmaker SK Hynix, and upbeat earnings results from GE Aerospace (GE), Elevance Health (ELV), and Union Pacific (UNP).
In political news, GOP leaders are discussing a debt-and-funding deal with Democrats, according to Politico, Saudi Arabia has pledged to invest $600 billion in the U.S. over the next four years, and President Trump will be speaking to the World Economic Forum in Davos at 11:00 a.m. ET.
The latter should provide its share of headlines to go along with the headlines from today's weekly jobless claims report.
Initial jobless claims for the week ending January 18 increased by 6,000 to 223,000 (Briefing.com consensus 219,000) while continuing jobless claims for the week ending January 11 jumped by 46,000 to 1.899 million -- the highest level since November 13, 2021.
The key takeaway from the report is the elevated level of continuing jobless claims, which connotes some increasing challenges in finding new employment after being laid off.
The Fed will be making note of that as it continues to take notes -- along with the rest of us -- on the president's tariff proposals.
