Stock Market Update

[BRIEFING.COM] The stock market got off to a promising start today, led by NVIDIA (NVDA 131.28, +4.65, +3.7%) and the mega-cap stocks, and some optimism over tax cut prospects after the House passed a resolution (217-215) for a large reconciliation bill that calls for $4.5 trillion in tax cuts over the next decade. The early gains carried the S&P 500 back above its 50-day moving average (6,005), but it didn't stay there for long. Sellers ultimately came in to reorient that key short-term technical level to a point of resistance again.

The inability to hold above that technical level invited a renewed wave of selling interest that the indices surfed for most of the afternoon trade. The Dow, Nasdaq, S&P 500, and Russell 2000 had been up as much as 0.6%, 1.4%, 0.9%, and 1.4%, respectively, at the best levels of the session, yet each of them retreated to negative territory in the afternoon session.

They did so, catalyzed by several proximate causes:

• The S&P 500's failure to hold above support at its 50-day moving average
• The inability of the mega-cap cohort to hold onto stronger gains
• An Axios report that the White House is ordering agencies to get ready for a large amount of firings
• A reminder from President Trump at his first Cabinet meeting that he is not dropping the tariffs on Canada and Mexico scheduled to go into effect March 4 and that his plan for reciprocal tariffs will start to be implemented April 2

The major indices managed to claw their way back from lower levels in the closing stages of trading, but the overall tone was understandably mixed -- and the indices themselves little changed -- in front of NVIDIA's market-moving earnings report after the close. The S&P 500 avoided a fifth consecutive loss by the narrowest of margins.

NVIDIA, which was down 9.1% over the last four sessions, exhibited relative strength today that helped the S&P 500 information technology sector (+0.9%) and Philadelphia Semiconductor Index (+2.1%) outperform. On the flip side, the S&P 500 consumer staples sector (-1.9%), which was the best-performing sector on a year-to-date basis coming into today, was the worst-performing sector.

Notably, as the early stock gains faded, the Treasury market, which favorably digested a $44 billion 7-yr note auction, gained steam behind some safe-haven positioning and festering growth concerns that were sparked by today's report that new home sales declined 10.5% month-over-month in January to a seasonally adjusted annual rate of 657,000. The 2-yr note yield settled the day down three basis at 4.07% while the 10-yr note yield fell five basis points to 4.25%, leaving it down 30 basis points for the month.

• DJIA: +2.3% YTD
• S&P 500: +1.3% YTD
• S&P Midcap 400: -0.6% YTD
• Nasdaq Composite: -1.2% YTD
• Russell 2000: -2.5% YTD

Reviewing today's economic data:

• New home sales decreased 10.5% month-over-month in January to a seasonally adjusted annual rate of 657,000 units (Briefing.com consensus 681,000) from an upwardly revised 734,000 (from 698,000) in December. On a year-over-year basis, new home sales were down 1.1%.
  • The key takeaway from the report is that new home sales in January felt the brunt of affordability constraints that were tightened by elevated mortgage rates and higher prices.
• MBA Mortgage Applications Index -1.2% week-over-week (prior -6.6%) with refinance applications down 4% and purchase applications flat

Thursday's economic calendar includes:

• 08:30 ET: The second estimate for Q4 GDP Briefing.com consensus 2.3%; prior 2.3%) and GDP Deflator (Briefing.com consensus 2.2%; prior 2.2%)
• 08:30 ET: Weekly Initial Claims (Briefing.com consensus 220K; prior 219K) and Continuing Jobless Claims (prior 1869K)
• 08:30 ET: January Durable Goods Orders (Briefing.com consensus 1.8%; prior -2.2%) and Durable Goods Orders, Excluding Transportation (Briefing.com consensus 0.4%; prior 0.3%)
• 10:00 ET: January Pending Home Sales (Briefing.com consensus -0.8%; prior -5.5%)