Stock Market Update

[BRIEFING.COM] The stock market initially traded higher, but gains faded quickly as participants responded to the economic releases at 10:00 ET. Treasury yields also shot higher as stocks declined in response to a stronger-than-expected ISM Services PMI reading for December and a November JOLTS - Job Openings Report that showed a noticeable increase in job openings.

The added wrinkle in the ISM Services PMI is that it also featured a notable pickup in the Prices Index (to 64.4% from 58.2%), which topped the 60.0% level for the first time since January 2024. The 10-yr yield was at 4.63% ahead of the data and settled at 4.68%, seven basis points higher than yesterday.

Losses in the major indices were fairly muted until the S&P 500 slid below its 50-day moving average (5,950), which drew in additional selling interest. The S&P 500 closed 1.1% lower and the Nasdaq Composite dropped 1.9%.

Outsized declines in mega cap names had an outsized impact on index losses. Apple (AAPL 242.21, -2.79, -1.1%), which was downgraded to Sell from Neutral at MoffettNathanson, and Tesla (TSLA 394.36, -16.69, -4.1%), which was downgraded to Neutral from Buy at BofA Securities, were standouts in that respect.

NVIDIA (NVDA 140.14, -9.29, -6.2%) was another influential loser after trading up as much as 2.5% at its high following Jensen Huang's keynote address last night at the Consumer Electronics Show.

The price action in NVDA and AAPL contributed to the 2.4% decline in the information technology sector, along with the loss in Microsoft (MSFT 422.37, -5.48, -1.3%). TSLA shares weighed down the consumer discretionary sector (-2.2%), along with the move in Amazon.com (AMZN 222.11, -5.50, -2.4%). 

The only S&P 500 sectors that closed higher were energy (+1.1%) and health care (+0.6%).

• Nasdaq Composite: +0.9% YTD
• Russell 2000: +0.8% YTD
• S&P 500: +0.5% YTD
• S&P Midcap 400: +0.5% YTD
• Dow Jones Industrial Average: -0.04% YTD

Reviewing today's economic data:

• November Trade Balance -$78.2 bln (Briefing.com consensus -$77.9 bln); Prior was revised to -$73.6 bln from -$73.8 bln
  • The key takeaway from the report is that the import surge likely reflects a bid to get ahead of President-elect Trump's tariff plans, meaning businesses might have more inventory than usual waiting to be utilized/sold that detracts from import demand in coming months (i.e., post-inauguration).
• December ISM Services 54.1% (Briefing.com consensus 53.0%); Prior 52.1%
  • The key takeaway from the report is that it was a double-whammy for rate cut expectations in that the expansion in services sector activity accelerated while the prices index picked up noticeably, printing its first reading above 60.0% since January 2024.
• November JOLTS - Job Openings 8.098 mln; Prior was revised to 7.839 mln from 7.744 mln

Looking ahead, market participants receive the following economic data on Wednesday:

• 7:00 ET: Weekly MBA Mortgage Index (prior -21.9%)
• 8:15 ET: December ADP Employment Change (Briefing.com consensus 131,000; prior 146,000)
• 8:30 ET: Weekly Initial Claims (Briefing.com consensus 218,000; prior 211,000) and Continuing Claims (prior 1.844 mln)
• 10:00 ET: November Wholesale Inventories (Briefing.com consensus -0.2%; prior 0.2%)
• 10:30 ET: Weekly crude oil inventories (prior -1.18 mln)
• 12:00 ET: Weekly natural gas inventories (prior -116 bcf)
• 14:00 ET: December FOMC Minutes
• 15:00 ET: November Consumer Credit (Briefing.com consensus $9.1 bln; prior $19.2 bln)