Stock Market Update

[BRIEFING.COM] It was a choppy session in the stock market. Participants were dealing with rising rates (10-yr yield hitting 4.73% at its high), volatile mega caps, and some economic releases. Ultimately, the S&P 500 settled 0.2% higher and the Dow Jones Industrial Average rose 0.3% while the Nasdaq Composite declined 0.1%.

The Treasury market settled little changed from yesterday after a choppy session. The 10-yr yield rose one basis point to 4.69% and the 2-yr yield settled one basis point lower at 4.29%. Treasuries were responding to this morning's economic releases, along with today's $22 billion 30-yr bond reopening, which met strong demand. 

The economic data included a below-consensus ADP Employment Change report for December (122,000; Briefing.com consensus 131,000), and an unexpected drop in weekly Initial Claims (201,000; Briefing.com consensus 218,000; prior 211,000).

Market participants also received the FOMC Minutes for the December 17-18 meeting, which echoed Fed Chair Powell's remarks in his press conference after the meeting. The minutes conveyed a belief that the Fed should hold off on another rate cut until it has more confidence in inflation returning to its 2% target and/or more concern about the labor market deteriorating in a more pronounced manner.

Stocks and bonds took the release in stride while the fed funds futures market repriced rate cut expectations. The fed funds futures market now sees only a 40.4% probability of a 25-basis points rate cut at the March FOMC meeting versus 53.0% a week ago and 69.1% a month ago, according to the CME FedWatch Tool.

As a reminder, the NYSE is closed tomorrow in observance of the National Day of Mourning in honor of late former President Jimmy Carter.

• Nasdaq Composite: +0.9% YTD
• S&P Midcap 400: +0.7% YTD
• S&P 500: +0.6% YTD
• Russell 2000: +0.4% YTD
• Dow Jones Industrial Average: +0.2% YTD

Reviewing today's economic data:

• Weekly MBA Mortgage Applications -3.7%; Prior -21.9%
• December ADP Employment Change 122K (Briefing.com consensus 131K); Prior 146K
• Weekly Initial Claims 201K (Briefing.com consensus 218K); Prior 211K, Weekly Continuing Claims 1.867 mln; Prior was revised to 1.834 mln from 1.844 mln
  • The key takeaway from the report is that layoff activity is low, but for employees that lose their job it has become more challenging to find a new one.
• November Wholesale Inventories -0.2% (Briefing.com consensus -0.2%); Prior was revised to 0.0% from 0.2%
• November Consumer Credit -$7.49 bln (Briefing.com consensus $9.1 bln); prior revised to $17.3 bln from $19.2 bln
  • The key takeaway from the report is that consumer credit contracted in November for only the third time in the past 16 months with revolving credit, which is subject to extra high interest rates, acting as the drag.