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The news cycle is in overload this morning, and that may help explain the mixed nature of the equity futures trade.
Currently, the S&P 500 futures are up 23 points and are trading 0.4% above fair value; the Nasdaq 100 futures are up 149 points and are trading 0.6% above fair value, and the Dow Jones Industrial Average futures are down 34 points and are trading 0.1% below fair value.
Here is a sample of what participants have on their plate today:
- Yesterday's FOMC decision to hold the target range for the fed funds rate unchanged at 4.25-4.50% and Fed Chair Powell's pronouncement that the Committee is not in a hurry to adjust its policy stance.
- The ECB cutting its key interest rates by 25 basis points, marking the fourth consecutive meeting that it has cut rates.
- A tragic mid-air collision between an American Airlines (AAL) regional jet and Blackhawk helicopter in Washington D.C. that had no survivors.
- Earnings reports and/or guidance from Microsoft (MSFT), Meta Platforms (META), Tesla (TSLA), IBM (IBM), Caterpillar (CAT), UPS (UPS), ServiceNow (NOW), The Cigna Group (CI), Whirlpool (WHR), Las Vegas Sands (LVS), Lam Research (LRCX), and Sherwin-Williams (SHW) that have been greeted with disparate reactions.
- A Bloomberg report suggesting the White House is mulling new ways for President Trump to control federal spending.
- Softbank is in discussions to invest $15-25 billion in OpenAI, according to The Wall Street Journal.
- The specter of Apple's (AAPL) earnings report after the close.
- Weak flash Q4 GDP readings from Germany, France, and Italy that left the eurozone's flash GDP flat qtr/qtr for Q4.
- The Advance Q4 GDP and weekly initial and continuing jobless claims reports.
In actuality, there has been a ton of earnings news since yesterday's close. It is simply too much to cover in this space. The safe generalization is that the earnings news, in aggregate, hasn't knocked the socks off the market.
That's not to say it was bad, only that it wasn't undeniably good across the board. Some focal points in that regard include a deceleration in Microsoft's Azure business, UPS issuing disappointing revenue guidance for FY25, Caterpillar coming up shy of quarterly revenue estimates, and Whirlpool and Cigna issuing disappointing EPS guidance for FY25.
To be fair, IBM put up some good numbers and issued encouraging guidance, META blew past EPS estimates and is winning plaudits for its AI growth prospects, and Tesla, which had disappointing automotive revenue in the quarter, seemingly assuaged investors with a forecast for the vehicle business to return to growth in 2025.
Turning back to the Advance Q4 GDP report, it showed real GDP decelerating to a seasonally adjusted annual rate of 2.3% (Briefing.com consensus 2.3%) versus 3.1% in the third quarter. The GDP Price deflator increased to 2.2% (Briefing.com consensus 2.4%) from 1.9% in the third quarter.
The key takeaway from the report is that there were stronger growth attributes in the fourth quarter than the headline number suggests. To that end, personal consumption expenditures were up 4.2% -- the strongest since Q1 2023 -- and real final sales of domestic product, which excludes the change in private inventories, was up 3.2%.
There was also some encouraging news in the weekly initial and continuing jobless claims report. Briefly, initial jobless claims for the week ending January 25 decreased by 16,000 to 207,000 (Briefing.com consensus 221,000) while continuing jobless claims for the week ending January 18 decreased by 42,000 to 1.858 million.
The key takeaway from the report is the low level of initial jobless claims -- a leading indicator -- which is a good signal for growth prospects, as it conveys a reluctance on the part of employers to let employees go.
Separately, the Treasury market isn't letting go of its gains. The 2-yr note yield is down three basis points to 4.20% and the 10-yr note yield is down six basis points to 4.50%. The drop in yields has been a supportive development for the stock market, not just this morning but over the course of the past few weeks.
