Stock Market Update

[BRIEFING.COM] It has been a mostly one-way market today with buyers dominating the price action. The Dow, Nasdaq, and S&P 500 all sit near their best levels of the day, supported by strength in the mega-cap stocks and a large-cap stock bias. Small-cap and mid-cap stocks are doing fine, too, just not as good as their larger-cap brethren.

The catalysts for today's broad-based gains are manifold:

• China reported better-than-expected retail sales, industrial production, and GDP data.
• There is speculative energy/excitement in front of President Trump's inauguration on Monday (due to extreme cold, a decision has been made to move the inauguration indoors).
• There is economic growth optimism with December housing starts, building permits, industrial production, and capacity utilization all exceeding consensus estimates.
• The mega-cap stocks have found some rebound vigor.

Lower Treasury yields were an early catalyst, but they reversed course after this morning's better-than-expected data. The 2-yr note yield, which traded down to 4.22%, is up three basis points to 4.27%, and the 10-yr note yield, which traded down to 4.57%, is unchanged at 4.61%.

Importantly, though, Treasury yields are down for the week with the better-than-feared PPI and CPI reports providing some needed relief. That downshift, and the impressive earnings results out of the financial sector, has helped the stock market get back on track, inviting renewed buying interest, short-covering activity, and even some fear of missing out on further gains.

Ten of the 11 S&P 500 sectors are higher today in a move that has seen the S&P 500 clear its 50-day moving average (5,966) and trade back above 6,000.

The consumer discretionary (+2.1%) and information technology (+1.9%) sectors are in a command position. The only laggard is the health care sector (-0.1%), which is being pressured by weakness in the drug stocks after the Department of Health and Human Services announced 15 additional drugs for Medicare price negotiations.

Merck (MRK 98.96, -1.74, -1.7%) and Johnson & Johnson (JNJ 147.32, -0.45, -0.3%) are the only two Dow components that are not trading higher. Apple (AAPL 230.15, +1.90, +0.8%) and Microsoft (MSFT 431.71, +7.13, +1.7%) are offsetting their losses in the Dow and have helped provide leadership for the broader market along with other mega-cap stocks. The Vanguard Mega-Cap Growth ETF (MGK) is up 1.6%.

Crypto-related stocks comprise another standout group, rallying on a Bloomberg report that President-elect is planning an executive order to declare cryptocurrency a national policy priority.

Separately, the Supreme Court upheld the ban on TikTok, although it is thought President-elect Trump is likely to announce a decision to pause that ban for 90 days. TikTok, the incoming president said, was part of a cadre of topics, including trade, that he discussed in a call today with Chinese President Xi Jinping.

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.