Stock Market Update

[BRIEFING.COM] The stock market had a mixed session at the index level, but the vibe under the surface was positive. Market participants were reacting to the cooler-than-expected inflation data released at 8:30 ET, which garnered a muted response from Treasuries and helped the upside bias in equities. There was also some momentum in play after the stock market staged a turnaround yesterday thanks to buy-the-dip interest. 

The December Producer Price Index (PPI) readings exceeded expectations, reflecting a welcome easing in inflationary pressures on a month-to-month basis. The year-over-year numbers were less market-friendly with PPI up 3.3% versus 3.0% in November, and core-PPI, which excludes food and energy, up 3.5%, unchanged from November. Treasuries still responded favorably, leading the 10-yr yield settled two basis points lower at 4.79% and the 2-yr yield settled four basis points lower at 4.36%.

The choppy moves in the major indices were related to volatility in the mega cap space. NVIDIA (NVDA 131.76, -1.47, -1.1%), Tesla (TSLA 396.36, -6.95, -1.7%), and Alphabet (GOOG 191.05, -1.24, -0.6%) traded lower with no specific news driving the movement while other names like Microsoft (MSFT 415.67, -1.52, -0.4%), Eli Lilly (LLY 744.91, -52.57, -6.6%), and Meta Platforms (META 594.25, -14.08, -2.3%) reacted negatively to headlines. 

MSFT reportedly paused hiring in its US consulting unit as part of a cost-cutting plan, according to CNBC; LLY lowered Q4 revenue guidance; and META reacted to reports that TikTok US is not going to be sold after initial reporting suggested that may be the case.

Small cap stocks soared while mega cap languished, leading the Russell 2000 to jump 1.1% from yesterday's close. This move was helped out by strength in its regional bank components, which outperformed in front of earnings reports from bank stocks this week.

Strength in the bank space also led the SPDR S&P Bank ETF (KBE) to close 3.3% higher and the SPDR S&P Regional Banking ETF (KRE) to close 3.4%. The S&P 500 financial sector was among the top performers today, gaining 1.3%. 

• S&P Midcap 400: +1.3% YTD
• Dow Jones Industrial Average: -0.1% YTD
• Russell 2000: -0.5% YTD
• S&P 500: -0.7% YTD
• Nasdaq Composite: -1.4% YTD

Reviewing today's economic data:

• December NFIB Small Business Optimism 105.1; Prior 101.7
• December PPI 0.2% (Briefing.com consensus 0.3%); Prior 0.4%, December Core PPI 0.0% (Briefing.com consensus 0.2%); Prior 0.2%
  • The key takeaway from the report is that the better-than-expected monthly readings have been clouded by the less inspiring year-over-year readings, as well as the understanding that inflation at the wholesale level moved in the wrong direction in 2024 (versus 2023) and remains elevated relative to the Fed's 2% inflation target.

Looking ahead, market participants receive the following economic data tomorrow:

• 7:00 ET: Weekly MBA Mortgage Index (prior -3.7%)
• 8:30 ET: December CPI (Briefing.com consensus 0.3%; prior 0.3%), Core CPI (Briefing.com consensus 0.2%; prior 0.3%), and January Empire State Manufacturing (Briefing.com consensus -2.0; prior 0.2)
• 10:30 ET: Weekly crude oil inventories (prior -959,000)