Stock Market Update

[BRIEFING.COM] The stock market is having a strong showing after Treasury yields turned sharply lower in response to a better-than-feared Consumer Price Index (CPI) for December. Some early enthusiasm has dissipated somewhat after the S&P 500 traded within ten points of its 50-day moving average (5,957) at its high, but the major indices still show solid gains. The S&P 500 is 1.6% higher, the Nasdaq Composite shows a 2.0% gain, and the Dow Jones Industrial Average trades 1.5% higher.

The CPI report featured a slight dip in the year-over-year rate for core CPI to 3.2% from 3.3%. The 10-yr note yield, which is most sensitive to changes in inflation, is down 12 basis points to 4.67%. The 2-yr note yield is down eight basis points to 4.28%.

The price action in Treasuries and the pleasing inflation data combined with better-than-expected earnings results from big banks to fuel today's broad rally. JPMorgan Chase (JPM 251.91, +4.44, +1.8%), Goldman Sachs (GS 602.19, +30.66, +5.3%), Wells Fargo (WFC 74.93, +3.73, +5.2%), Citigroup (C 77.23, +3.73, +5.0%), Blackrock (BLK 1013.00, +49.83, +5.2%), and Bank of New York Mellon (BK 81.45, +5.53, +7.3%) were the standouts from the financial sector. 

The heavily-weighted financial sector shows a 2.2% gain and leadership from mega cap names has propelled the communication services (+2.3%), consumer discretionary (+2.1%), and information technology (+1.9%) sectors toward the top of the leaderboard as well.

The only sector trading lower at this point is consumer staples (-0.1%).

Reviewing today's economic data:

• Weekly MBA Mortgage Applications Index 33.3%; Prior -3.7%
• December CPI 0.4% (Briefing.com consensus 0.3%); Prior 0.3%, December Core CPI 0.2% (Briefing.com consensus 0.2%); Prior 0.3%
  • The key takeaway from the report for a market worried about inflation heating up again is that these results were better than feared which, at first blush, shrouded the reality that the consumer inflation rate is still running well above the Fed's 2% target (albeit a target tied to the PCE Price Index).
• January Empire State Manufacturing -12.6 (Briefing.com consensus -2.0); Prior was revised to 2.1 from 0.2