Stock Market Update

[BRIEFING.COM] There is a new administration occupying the White House, yet the stock market is trading today with a bullish bias that was familiar throughout much of the time in office for the last administration. The carryover trade, if you will, has been fortified by a belief that the Trump administration will be pushing for deregulation and lower tax rates as growth drivers.

Some of that push was on display yesterday when President Trump signed a barrage of executive orders immediately after his inauguration that undid many of the policies of the prior administration. He also declared a national energy emergency, which will allow more oil and gas production, and ordered his representatives to review trade agreements and make recommendations for revisions.

What the stock market latched onto, though, was the absence of a tariff announcement on China. That created some extra enthusiasm for a market that had its best week since the election last week, helping it to overcome the president's admission that he is thinking in terms of a 25% tariff for Canada and Mexico starting February 1.

Some have viewed that admission as a negotiating tactic, which has also helped mitigate its impact on the market. Another important influence helping to mitigate any fallout from tariff talk has been the Treasury market and specifically the inflation-sensitive 10-yr note. Its yield has dropped another three basis points today to 4.58%. 

That has not only been a calming influence for stocks, but also a catalyst for follow-through buying interest along with the good earnings news from Dow component 3M (MMM 147.91, +6.88, +4.9%) and a CBS News report that President Trump is going to announce a $500 billion AI infrastructure initiative with OpenAI, Softbank, and Oracle (ORCL 169.87, +8.90, +5.5%).

Today's gains have had an encouraging, broad-based bent to them, and have been forged despite a 4.1% drop in Apple (AAPL 220.60, -9.38, -4.1%) linked to analyst downgrades at Jefferies and Loop Capital, and a Bloomberg report that iPhone sales fell 18% in China during the December quarter.

Consistent with the stock market's pro-growth view, small-cap and mid-cap stocks are outperforming large-cap stocks, value stocks are outperforming growth stocks, and 10 of the 11 S&P 500 sectors are trading higher with the cyclical industrials sector (+1.9%) sitting atop the performance rankings. The energy sector (-0.2%) is the only laggard.

The Russell 2000 is up 1.6% and the S&P Midcap 400 Index is up 1.4% versus a 0.8% gain for the market cap-weighted S&P 500 and a 1.2% gain for the equal-weighted S&P 500.

There was no U.S. economic data of note today.