Stock Market Update

[BRIEFING.COM] The stock market traded with a positive bias, but index performance was mixed due to declines in highly influential names. The Nasdaq Composite, which flirted with the unchanged mark through most of the session, ultimately settled 0.2% higher. The S&P 500 logged a 0.4% gain and the Dow Jones Industrial Average jumped 0.7%.

Alphabet (GOOG 193.30, -14.41, -6.9%), which had been on an impressive run, saw a sharp decline after its earnings results didn't meet the high expectations set by investors, compounded by its $75 billion capital expenditure plan for 2025. This loss followed a recent peak all-time high of over $204 just five days ago on January 31.

Apple (AAPL 232.47, -0.33, -0.1%) was also in the red after a Bloomberg report surfaced that China was contemplating a probe into its App Store fees and policies. Shares recovered nicely off their worst levels, though, after trading down as much as 1.9%.

Walt Disney (DIS 110.54, -2.76, -2.4%) was another notable decliner, slipping 2.4% after reporting a drop in Disney+ subscribers.

Despite these challenges, market breadth was broadly positive, with advancers outnumbering decliners by nearly a 2-to-1 ratio on both the NYSE and the Nasdaq. The equal-weighted S&P 500 was up 0.5% and eight of the 11 S&P 500 sectors closed higher. 

The drop in market rates contributed to the upside bias in equities. The 10-yr yield dropped nine basis points to 4.42% and the 2-yr yield dropped four basis points to 4.18%. The rally in the Treasury market followed weaker-than-expected Services PMI readings for January out of China, Europe, and the U.S. that fostered some growth concerns.

The rally in the bond market was undeterred by the news from the U.S. Treasury that it will increase the size of this month's 10-, 20-, and 30-yr auctions by three billion apiece. 

Buying in the Treasury market was partially fueled by heightened geopolitical uncertainty following surprise comments from President Trump during a press conference with Israeli Prime Minister Netanyahu indicating that the U.S. would take over the Gaza Strip. However, the aforementioned economic data seemed to be more influential than geopolitical worries, which weren't reflected in commodity prices. Oil prices usually increase amid increased conflict in the Middle East due to worries about supply disruptions, but WTI crude oil futures settled below their 50-day moving average (72.13) at $71.11/bbl, the lowest level of the year thus far.

• Dow Jones Industrial Average: +5.5% YTD
• S&P Midcap 400: +4.1% YTD
• Russell 2000: +3.9% YTD
• S&P 500: +3.1% YTD
• Nasdaq Composite: +2.0% YTD

Reviewing today's economic data:

• The December Trade Balance Report showed a widening in the deficit to $98.4 billion (Briefing.com consensus -$98.0 billion) from a downwardly revised $78.9 billion (from -$78.2 billion) in November. December exports were $7.1 billion less than November exports while December imports were $12.4 billion more than November imports.
  • The key takeaway from the report is that the big jump in imports was presumably a function of trying to get ahead of possible tariff actions.
• January S&P Global US Services PMI - Final 52.9 vs. 52.8 prior
• The ISM Services PMI decreased to 52.8% in January (Briefing.com consensus 53.9%) from a downwardly revised 54.0% (from 54.1%) in December. The dividing line between expansion and contraction is 50.0%, so the January reading reflects services sector activity expanding but at a slower pace than the prior month. January marked the 53rd time in 56 months that the Services PMI indicated expansion.
  • The key takeaway from the report is that the pace of expansion in the nation's largest sector decelerated in January. That will likely temper growth forecasts for the first quarter.

Market participants receive the following economic data on Thursday:

• 8:30 ET: Preliminary Q4 Productivity (actual 0.8%; prior 2.2%) and Unit Labor Costs (Briefing.com consensus 2.6%; prior 0.8%), weekly Initial Claims (Briefing.com consensus 213,000; prior 207,000), and Continuing Claims (prior 1.858 mln)
• 10:30 ET: Weekly natural gas inventories (prior -321 bcf)