Stock Market Update

[BRIEFING.COM] The stock market started the session in rebound-mode after the major indices registered sharp declines yesterday in response to the FOMC's decision and acknowledgement that committee members expect rates to stay higher for longer. Market breadth was positive and gains in the mega cap space provided an added boost to the broader market. Things deteriorated as the session progressed, though. 

Ultimately, the S&P 500 and Nasdaq Composite each settled 0.1% lower than yesterday. The deterioration was related to rising rates and rollover action in mega cap names. The 10-yr yield jumped another eight basis points today to 4.57% following a batch of economic data (initial jobless claims, third estimate for Q3 GDP, existing home sales, and leading indicators) that was better than expected.

Microsoft (MSFT 437.03, -0.36, -0.1%), Alphabet (GOOG 189.70, -0.45, -0.2%), and Meta Platforms (META 595.57, -1.62, -0.3%) were among the mega cap names that fell from initial gains as the market declined. MSFT shares were up as much as 1.3% at session highs, GOOG was up as much as 2.3%, and META was up as much as 2.4%.

Disappointing earnings results and/or guidance from Micron (MU 87.09, -16.81, -16.2%) and Lennar Corp. (LEN 138.40, -7.53, -5.2%) contributed to the negative vibe in today's session. This price action also contributed to the underperformance of stocks in their respective industries. The SPDR S&P Homebuilder ETF (XHB) traded 2.2% lower and the PHLX Semiconductor Index (SOX) showed a 1.6% decline.

Some individual stocks were able to go against the grain, settling higher. FedEx (FDX 275.88, +2.72, +1.0%), NIKE (NKE 77.10, +0.20, +0.3%), and Carnival Corp. (CCL 25.18, +0.36, +1.5%) were standouts in that respect in front of their earnings reports.

Separately, the Bank of England voted 6-to-3 to leave its benchmark rate unchanged at 4.75% and the Bank of Japan voted 8-to-1 to leave its benchmark rate unchanged at 0.25%.

• Nasdaq Composite: +29.1% YTD
• S&P 500: +23.0% YTD
• Dow Jones Industrial Average: +12.3% YTD
• S&P Midcap 400: +11.7% YTD
• Russell 2000: +9.6% YTD

Reviewing today's economic data:

• Weekly Initial Claims 220K (Briefing.com consensus 237K); Prior 242K, Weekly Continuing Claims 1.874 mln; Prior was revised to 1879 mln from 1.886 mln
  • The key takeaway from the report is the low level of initial jobless claims, which connotes a reluctance on the part of employers to layoff staff.
• Q3 GDP - Third Estimate 3.1% (Briefing.com consensus 2.8%); Prior 2.8%, Q3 GDP Deflator - Third Estimate 1.9% (Briefing.com consensus 1.9%); Prior 1.9%
  • The key takeaway from the report is that it is dated (we're less than two weeks away from the end of the fourth quarter); however, the report speaks to the enduring -- and surprising -- strength of the U.S. economy despite the Fed raising rates 12 times between March 2022 and July 2023.
• December Philadelphia Fed Index -16.4 (Briefing.com consensus 3.0); Prior -5.5
• November Existing Home Sales 4.15 mln (Briefing.com consensus 4.10 mln); Prior 3.96 mln
  • The key takeaway from the report is that it shows how lower mortgage rates can move the needle on existing home sales given the pent-up demand; however, with mortgage rates having risen noticeably again, expectations for continuing strength in existing home sales will be tempered by affordability concerns.
• November Leading Indicators 0.3% (Briefing.com consensus -0.1%); Prior -0.4%

Friday's economic lineup features:

• 8:30 ET: November Personal Income (Briefing.com consensus 0.4%: prior 0.6%), Personal Spending (Briefing.com consensus 0.5%; prior 0.4%), PCE Prices (Briefing.com consensus 0.2%; prior 0.2%), and Core PCE Prices (Briefing.com consensus 0.2%; prior 0.3%)
• 10:00 ET: Final December University of Michigan Consumer Sentiment (Briefing.com consensus 74.2; prior 74.0)