Stock Market Update

[BRIEFING.COM] The S&P 500 (+0.9%), Nasdaq Composite (+1.7%), and Russell 2000 (+0.6%) are higher while the Dow Jones Industrial Average trades above and below its prior closing level today. Market breadth is positive, reflecting broad buying activity, but mega cap gains have an outsized impact on the S&P 500 and Nasdaq Composite. 

Apple (AAPL 249.15, +1.38, +0.6%), Amazon.com (AMZN 230.53, +5.49, +2.4%), Alphabet (GOOG 196.30, +9.77, +5.3%), Meta Platforms (META 635.74, +16.54, +2.7%), and Tesla (TSLA 414.53, +13.56, +3.4%) are standouts from the mega cap space, reaching fresh record highs today.

Investors are reacting to this morning's release of the November Consumer Price Index (CPI), which was in-line with expectations and supported the market's rate cut view.

Expectations for a 25 basis points rate cut next week moved higher following the data. The fed funds futures market sees a 96.2% probability of a 25 basis points next week, up slightly from 88.9% yesterday and 78.1% last week, according to the CME FedWatch tool.

Treasury yields initially moved lower after the CPI report, but buying dissipated somewhat. The 2-yr yield moved to 4.12% from 4.17% immediately following the release and sits at 4.14% now. The 10-yr yield dipped to 4.23% from 4.25% right after 8:30 ET, but sits at 4.25% again now.

Reviewing today's economic data: 

• Weekly MBA Mortgage Applications Index 5.4%; Prior 2.8%
• November CPI 0.3% (Briefing.com consensus 0.3%); Prior 0.2%, November Core CPI 0.3% (Briefing.com consensus 0.3%); Prior 0.3%
  • There are two key takeaways from the report. The first is that the report wasn't worse than feared. It was right in-line with expectations; therefore, it did not upset the market's view that the Fed will cut rates another 25-basis points at next week's FOMC meeting. The second key takeaway is in the breakdown of the shelter index (+0.3%), which included the smallest increases for owners' equivalent rent (+0.2%) and the index for rent (+0.2%) since April 2021 and July 2021, respectively. With the lag effect of shelter costs on CPI computations, assumptions are being made that this variable will continue to factor favorably in future CPI reports and help temper future inflation readings.
• Weekly EIA crude oil inventories had a draw of 1.43 million barrels; prior draw of 5.07 million barrels