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Briefing.com Summary:
*A big loss in Microsoft after its earnings report is offsetting gains in META, IBM, and Tesla after their earnings results.
*Metal prices continue to rally, and oil is on the move on geopolitical concerns.
*A near-term rate cut seems unlikely after yesterday's FOMC meeting and today's data.
The S&P 500 climbed above the 7,000 level for the first time ever early in yesterday's trading. That move didn't last long. The market began to fade almost as soon as an intraday record high of 7,002.28 was established and never made another run at 7,000, closing at 6,978.03.
There will perhaps be another attempt at it today, but it will take some work to make it happen given the mixed response to the large slate of earnings results released since yesterday's close.
Currently, the S&P 500 futures are up 16 points and are trading 0.2% above fair value, the Nasdaq 100 futures are up 35 points and are trading 0.2% above fair value, and the Dow Jones Industrial Average futures are up nine points and are trading fractionally above fair value.
Those indications feel underwhelming knowing that Meta Platforms (META), IBM (IBM), and Tesla (TSLA) are up 9.6%, 8.1%, and 1.7%, respectively, in pre-market trading. A major offset is Microsoft (MSFT), which is down 6.9% in pre-market trading and sports a market cap that is roughly equal to the market caps of the aforementioned companies combined.
That distinction aside, another clear distinction in all those reports, plus the one from Samsung, is that there is no slowdown in the push to build, power, and integrate AI solutions. That should translate into some favoritism for AI plays, but so far today it isn't doing much to move the needle for the broader market, which is battling the law of both large numbers and large expectations.
It is also battling some fading rate cut expectations, certainly over the remainder of Jerome Powell's term as Chair of the Board of Governors (ends in May). Yesterday's directive and press conference left the impression that the Fed is feeling better about labor market conditions and the economy overall and doesn't feel a need at this point to cut rates.
The stock market favors lower rates, but any disappointment that a near-term rate cut is unlikely has been mitigated by the understanding that the economy is growing above potential and that a new Fed Chair, with a bias for lower rates, will be entering the mix after Fed Chair Powell's term ends. So, it is a bit of a wash when it comes to the policy rate outlook, which is why the stock market isn't showing more disappointment over the likelihood that the policy rate won't be cut again in the near term.
A few pieces of economic data this morning, and a continued jump in oil prices and metal prices, fit that view.
Initial jobless claims for the week ending January 24 decreased by 1,000 to 209,000 (Briefing.com consensus: 205,000), while continuing jobless claims for the week ending January 17 decreased by 38,000 to 1.827 million, which is the lowest level since September 21, 2024.
The key takeaway from the report is that it corroborates the idea that labor market conditions are still reasonably good to promote solid consumer spending activity that will be supportive of ongoing economic growth and a Fed that can show more patience before cutting rates again.
The revised Q3 productivity report didn't contain any new surprises or changes. The growth rate for Q3 productivity remained at an impressive 4.9% (Briefing.com consensus: 4.9%), while unit labor costs decreased 1.9% (Briefing.com consensus: -1.9%), unchanged from the advance report.
With no changes, the key takeaway remained the same: this productivity report is the golden ticket for the economy (and the Fed, per chance), as it reflects strong growth without labor cost inflation.
There was a change in the trade deficit. It widened to $56.8 billion in November (Briefing.com consensus: -$43.5 billion) from an upwardly revised $29.2 billion (from -$29.4 billion) in October. Exports were $10.9 billion less than October exports, and imports were $16.8 billion more than October imports.
The key takeaway from the report is that it will create a drag on Q4 GDP growth expectations. A possible silver lining, though, is that the import activity could be construed as a reflection of increased demand in the U.S.
The Treasury market didn't show much reaction to the data. The 2-yr note yield is down one basis point to 3.57%, and the 10-yr note yield is up one basis point to 4.26%.
Separately, the dollar remains under pressure. The U.S. Dollar Index is down 0.2% to 96.24. That weakness is encouraging the momentum trade in the metals market and providing some added lift to oil prices, which are also rising on concerns about a possible military strike on Iran. Gold futures are up 4.7% to $5,552.00/toz; silver futures are up 5.3% to $119.48/toz; copper futures are up 9.3% to $6.48/lb; and WTI crude futures are up 3.1% to $65.19/bbl.
There are a lot of moving parts in today's market, not to mention the specter of Apple's (AAPL) earnings report after the close. All those moving parts are crosscurrents for technical, fundamental, mechanical, and momentum factors, which may just be why the market itself isn't moving much ahead of the open.
