Stock Market Update

[BRIEFING.COM] The January Consumer Price Index on Wednesday sent some inflation shockwaves through the stock market and Treasury market. Fortunately, there were no aftershocks following today's release of the January Producer Price Index, which wasn't all that pleasing from a headline perspective but still created a sense among market participants that there might not be an inflation shockwave in the PCE Price Index when it is released on February 28.

That sense of things was influenced by month-over-month declines in various components, like airfare and physician care, and it resonated in the Treasury market, which provided clearance for the stock market to continue with yesterday's buy-the-dip efforts.

The stock market did so with conviction, further energized in the afternoon session by the recognition that President Trump's reciprocal tariff plan might not be as economically provocative as feared. To wit, the tariffs won't be applied until April 1 at the earliest, and at that time will be applied on a case-by-case basis. The president also injected a pleasant geopolitical thought with the announcement that he will be seeking a discussion with Xi Jinping and Vladimir Putin in which he will suggest they all cut their defense spending in half and pursue denuclearization.

The 2-yr note yield fell six basis points to 4.31% and the 10-yr note yield dropped 11 basis points, completing a round-trip to 4.53% where it stood just before yesterday's release of the January Consumer Price Index.

The move in the 10-yr note yield would have effectively stolen today's trading show if not for the S&P 500's assault on its record closing high (6118.71). Ultimately, it came up a whisker shy of a new high, yet there was still ample cause for celebration with all 11 S&P 500 sectors ending the day higher.

The materials (+1.7%), consumer discretionary (+1.6%), information technology (+1.5%), and communication services (+1.1%) sectors were today's biggest winners while the utilities (+0.1%) and industrials (+0.1%) sectors brought up the rear.

Individually, MGM Grand (MGM 40.37, +6.00, +17.5%) and Molson Coors (TAP 58.54, +5.09, +9.5%) were the biggest gainers among S&P 500 components, rallying in the wake of their earnings results, yet other big moves were registered outside the S&P 500. Stocks like AppLovin (APP 471.67, +91.35, +24.0%), Crocs (CROX 110.05, +21.22, +23.9%), and Robinhood Markets (HOOD 6380, +7.89, +14.1%) were standouts in that regard.

Dow component Cisco Systems (CSCO 63.84, +1.31, +2.1%) advanced after its earnings report, yet NVIDIA (NVDA 135.29, +4.15, +3.2%) and Apple (AAPL 241.53, +4.66, +2.0%) took the wheel as drivers of the price-weighted average. They were mega-cap leaders along with Tesla (TSLA 355.94, +19.43, +5.8%).

Reflecting today's broad-based rally effort, advancers led decliners by a better than 3-to-1 margin at the NYSE and by a roughly 5-to-2 margin at the Nasdaq; the Russell 2000 climbed 1.2%; the S&P Midcap 400 advanced 0.9%; and the equal-weighted S&P 500 jumped 0.9%.

• Dow Jones Industrial Average: +5.1% YTD
• S&P 500: +4.0% YTD
• Nasdaq Composite: +3.3%
• S&P Midcap 400: +2.6% YTD
• Russell 2000: +2.3% YTD

Reviewing today's economic data:

• The Producer Price Index for final demand increased 0.4% month-over-month (Briefing.com consensus 0.2%) following an upwardly revised 0.5% increase (from 0.2%) in December. Excluding food and energy, the index for final demand increased 0.3% month-over-month (Briefing.com consensus 0.3%) following an upwardly revised 0.4% increase (from 0.0%) in December. On a year-over-year basis, the index for final demand was up 3.5% (3.51% unrounded) versus 3.5% in December (3.46% unrounded). Excluding food and energy, the index for final demand was up 3.6% (3.61% unrounded) versus 3.7% in December (3.75% unrounded).
  • The key takeaway from the report is that the month-over-month readings were less upsetting than the month-over-month readings seen in the CPI report. Also, the year-over-year readings look improved at first blush, yet the revisions moved the December year-over-year readings for PPI and core PPI higher (versus the initial readings), so the improvement in January is from a higher base, meaning it is relative and not absolute. (Sidenote: when the December PPI report was first released, PPI was up 3.3% year-over-year and core PPI was up 3.5%).
• Initial jobless claims for the week ending February 8 decreased by 7,000 to 213,000 (Briefing.com consensus 217,000) while continuing jobless claims for the week ending February 1 decreased by 36,000 to 1.850 million.
  • The key takeaway from the report is the low level of initial jobless claims, which continue to connote an otherwise positive demand outlook on the part of employers who are reluctant to cut staff.

Friday's economic lineup includes:

• 8:30 a.m. ET: January Retail Sales (Briefing.com consensus 0.0%; prior 0.4%) and Retail Sales, Ex-Auto (Briefing.com consensus 0.3%; prior 0.4%)
• 8:30 a.m. ET: January Export Prices (prior 0.3%) and Export Prices, excluding agricultural products (prior 0.3%); Import Prices (prior 0.1%) and Import Prices, excluding fuel (prior 0.1%)
• 9:15 a.m. ET: January Industrial Production (Briefing.com consensus 0.3%; prior 0.9%) and Capacity Utilization (Briefing.com consensus 77.7%; prior 77.6%)
• 10:00 a.m. ET: December Business Inventories (Briefing.com consensus 0.1%; prior 0.1%)