Stock Market Update

[BRIEFING.COM] The stock market has exhibited mixed action at the index level today, but the vibe under the surface has been negative through the session. Decliners lead advancers by a 2-to-1 margin at the NYSE and by a 3-to-2 margin at the Nasdaq.

The downside bias is in response to President-elect Trump saying that he will impose an additional 10% tariff on China, and a 25% tariff for Mexico and Canada, on his first day in office until the flow of migrants and fentanyl into the country stops.

Rising market rates, reflecting concerns that tariffs may stoke inflation pressure, have also contributed to the overall negative bias. The 2-yr note yield is up one basis point to 4.28% and the 10-yr note yield is up five basis points to 4.31% despite an ugly 17.3% month-over-month decline in new home sales in October and an average 12-month inflation expectations reading of 4.9% seen in the November Consumer Confidence Report that was the lowest since March 2020 (not that 4.9% is low, but it is trending in the right direction).

The S&P 500 (+0.4%) and Nasdaq Composite (+0.6%) have managed to trade higher in an otherwise downbeat tape thanks to gains in mega cap components. The Dow Jones Industrial Average continues to lag its counterparts, down 0.1% from yesterday.

Amgen (AMGN 270.08, -23.91, -8.1%) has been a drag on the DJIA following disappointing news about its Phase 2 trial update for its weight-loss drug MariTide. In contrast, Eli Lilly (LLY 794.53, +39.53, +5.2%), a competitor in the weight-loss drug space, sports an outsized gain.

LLY shares are reacting to the White House announcing steps to reduce prescription drug costs, including a proposal to expand coverage of anti-obesity medications for Medicare and Medicaid beneficiaries.

Small and mid-cap stocks have pared some of their earlier losses, but still struggle under selling interest. The Russell 2000, which was down as much as 1.1%, and the S&P Mid Cap 400, which had fallen 1.0%, are now both trading 0.5% lower.

The declines in these indices are largely attributed to profit-taking following a strong month of gains. The Russell 2000 is up 10.6% in November, while the S&P Mid Cap 400 has gained 9.0% since October.

Reviewing overnight developments:

• September FHFA Housing Price Index 0.7%; Prior was revised to 0.4% from 0.3%
• September S&P Case-Shiller Home Price Index 4.6% (Briefing.com consensus 4.7%); Prior 5.2%
• November Consumer Confidence 111.7 (Briefing.com consensus 113.0); Prior was revised to 109.6 from 108.7
  • The key takeaway from the report is that consumers' view of the present situation picked up nicely, particularly as it relates to the labor market. That is noteworthy because, if consumers feel good about job security and/or their ability to find a new job, they are apt to keep spending freely on discretionary goods/services.
• October New Home Sales 610K (Briefing.com consensus 718K); Prior 738K
  • The key takeaway from the report is that new home sales, which are tabulated when contracts are signed, dropped sharply in October as mortgage rates rose sharply in the wake of the Fed's first rate cut in September. The effects of the hurricanes were also likely to blame for the extra weakness seen in the South, which is the nation's biggest region for new home sales.