Stock Market Update

[BRIEFING.COM] The stock market put its rally cap back on Friday, paced by mega-cap leadership, growth optimism, and a speculative buzz ahead of Monday's inauguration of Donald J. Trump as the 47th President of the United States of America.

That buzz was a catalyst for cryptocurrencies and crypto-related stocks, which advanced on a Bloomberg report that President Trump is planning an executive order to declare cryptocurrency a national policy priority. That report was met with other reports that suggested the incoming president might potentially announce a cascade of executive orders soon after taking office.

We heard from President-elect Trump today that he had a phone call with China's President, Xi Jinping, that was described as "a very good one" that touched on topics like trade, fentanyl, and TikTok. Coincidentally, the Supreme Court today upheld the TikTok ban that is slated to go into effect Sunday; however, the market remained inclined to think that President Trump will order a pause on that ban for 90 days.

Separately, there was some speculation that Elon Musk could purchase TikTok. That speculation helped drive Tesla (TSLA 426.50, +12.68, +3.1%), which was one of several mega-cap stocks that carried the market today. The Vanguard Mega-Cap Growth ETF (MGK) ended the day up 1.4% after being up as much as 1.8%.

The influence of the mega-cap stocks was evident in the consumer discretionary (+1.7%), information technology (+1.7%), and communication services (+1.1%) sectors, which outperformed the market. In fact, they were the only sectors that outperformed the S&P 500, which closed above its 50-day moving average (5,966).

Still, every S&P 500 sector was higher today with the exception of the real estate sector (-0.04%) and the health care sector (-0.7%). The latter was upended by a weak showing from the drug stocks, which were undercut by the Department of Health and Human Services announcing 15 additional drugs for Medicare's price negotiations, including Novo Nordisk's (NVO 78.71, -4.36, -5.3%) Ozempic and Wegovy.

Small-cap and mid-cap stocks finished the day higher but trailed the large-cap stocks, which were today's favored trades.

Elsewhere, Treasury yields were little changed from Thursday's settlement, but they failed to hold some overnight gains following the release of stronger-than-expected housing starts, building permits, and industrial production in December. Those reports followed on the heels of China posting better-than-expected retail sales, industrial production, and GDP data.

Reviewing today's economic data:

• Total housing starts increased 15.8% month-over-month in December to a seasonally adjusted annual rate of 1.499 million units (Briefing.com consensus 1.318 million). Total building permits were down 0.7% month-over-month to a seasonally adjusted annual rate of 1.483 million (Briefing.com consensus 1.454 million).
  • The key takeaway from the report is that there were gains in single-unit starts (+3.3%) and single-unit permits (+1.6%), which is encouraging for a housing market that needs new supply to compensate for the limited inventory in the existing home market.
• Total industrial production increased 0.9% month-over-month in December (Briefing.com consensus 0.3%) following an upwardly revised 0.2% increase (from -0.1%) in November. The capacity utilization rate jumped to 77.6% (Briefing.com consensus 77.0%) from an upwardly revised 77.0% (from 76.8%) in November. Total industrial production increased 0.5% yr/yr while the capacity utilization rate was 2.1 percentage points below its long-run average.
  • The key takeaway from the report is that industrial production showed some rebound verve after being depressed in recent months by the hurricanes and the Boeing strike.

U.S. markets will be closed Monday for Martin Luther King, Jr. Day.