Stock Market Update

[BRIEFING.COM] The stock market experienced some turbulence on the first session of the year. The major indices initially moved higher, bolstered by buy-the-dip trading after a soft close to 2024 and some rebalancing activity at the start of the year. Rising rates and mega cap losses drove the major indices lower around mid-day, though. The stock market ultimately closed off session lows and losses weren't very pronounced.

The S&P 500 which traded up as much as 0.9%, closed 0.2% lower. The Nasdaq Composite settled with a 0.2% decline after trading up as much as 1.1% at its intraday high. Small cap stocks outperformed their larger peers, leading the Russell 2000 to close 0.1% higher.

Apple (AAPL 243.85, -6.57, -2.6%) and Tesla (TSLA 379.28, -24.56, -6.1%) extended early declines as the major indices moved to session lows. Apple shares reacted to some cautious comments on iPhone demand from the analyst at UBS. Tesla's weakness followed its Q4 deliveries report, which put a cap on the company's first annual decline in deliveries. Microsoft (MSFT 418.58, -2.92, -0.7%) was another influential loser with no specific catalyst, turning lower after trading up as much as 1.1% at its intraday high.

Losses in the aforementioned names contributed to losses in their respective S&P 500 sectors. The consumer discretionary sector was the worst performer, dropping 1.3%, and the information technology sector logged a 0.2% gain.

Gains in its semiconductor-related components provided some offsetting support to the info tech sector. This price action also led the PHLX Semiconductor Index (SOX) to settle with a 0.8% gain.

The energy sector was a winning standout, jumping 1.0% as commodity prices climbed. WTI crude oil futures settled 1.9% higher at $73.11/bbl and natural gas futures rose 1.6% to $3.15/mmbtu.

Treasuries settled with losses, which contributed to the downside bias in equity indices. The 2-yr yield settled one basis point higher at 4.25% after hitting 4.20% earlier and the 10-yr yield settled one basis point higher at 4.58% after hitting 4.51%.

The ongoing strength in the dollar, which can be a drag on earnings for multinational companies, was another contributing factor in the downside bias. The U.S. Dollar Index was up 0.9% to to 109.33, hitting its highest level since September 2022. This was largely at the expense of the euro (EUR/USD -1.0% to 1.0252), which keeps sinking on growth and policy rate divergences.

• Russell 2000: +0.1% YTD
• Nasdaq Composite: -0.2% YTD
• S&P 500: -0.2% YTD
• S&P Midcap 400: -0.2% YTD
• Dow Jones Industrial Average: -0.4% YTD

Reviewing today's economic data:

• Initial jobless claims for the week ending December 28 decreased by 9,000 to 211,000 (Briefing.com consensus 224,000) while continuing jobless claims for the week ending December 21 decreased by 52,000 to 1.844 million.
  • The key takeaway from the report is the low level of initial claims -- a leading indicator -- as that connotes a situation where employers are reluctant to let employees go, which goes hand-in-hand with an optimistic view of business prospects.
• Total construction spending was unchanged month-over-month in November (Briefing.com consensus 0.2%) following an upwardly revised 0.5% increase (from 0.4%) in October. Total private construction was up 0.1% month-over-month while total public construction declined 0.1% month-over-month. On a year-over-year basis, total construction spending was up 3.0%.
  • The key takeaway from the report is that there wasn't much impulse for construction spending in November, particularly on the nonresidential side of things.
• December S&P Global US Manufacturing PMI - Final checked in at 49.4 versus the preliminary reading of 48.3 and the final November reading of 49.7. The dividing line between expansion and contraction is 50.0, so the December PMI represents activity contracting at a slightly faster pace than the prior month.
• The MBA Mortgage Applications Index was down 21.9% from two weeks before with refinance applications down 36% and purchase applications down 13% (note: this data is usually released on a weekly basis, so the actuals, which aren't necessarily good, also aren't as bad as they appear at first blush)

Looking ahead to Friday, market participants receive the following economic data:

• 10:00 ET: December ISM Manufacturing Index (Briefing.com consensus 48.5%; prior 48.4%)
• 10:30 ET: EIA Natural Gas Inventories (prior -93 bcf)