Stock Market Update

[BRIEFING.COM] The stock market began the final session of the week on a positive note, with major indices pushing higher thanks to gains in mega-cap stocks. Investors seemed largely unaffected by the January Employment Situation report, released at 8:30 ET. The report was solid, showing an increase in nonfarm payrolls and a historically low unemployment rate of 4.0%. Market participants took the 0.5% increase in average hourly earnings, a potential inflationary signal, in stride.

The S&P 500 was up as much as 0.3% and the Nasdaq Composite traded up as much 0.4% at their best levels of the day.

The optimistic start quickly unraveled at 10:00 ET following the release of the preliminary February University of Michigan Consumer Sentiment survey. The headline sentiment figure came in weaker than expected, posting 67.8 compared to the anticipated 71.3. The main point of concern, though, was that year-ahead inflation expectations spiked to 4.3%, a sharp jump from 3.3%.

This shift in consumer sentiment triggered a sell-off in the Treasury market, which exerted additional pressure on equities. The 10-year yield settled five basis points higher at 4.49%, while the 2-year yield climbed by seven basis points to 4.28%.

Stocks faced additional selling interest when reports surfaced that President Trump had informed Republican lawmakers of his plans to impose additional tariffs as early as today. The potential for political shifts over the weekend, when markets would not be able to react in real-time, added a layer of uncertainty.

By the close, the S&P 500 was 1.0% lower, near its worst level of the session. The Nasdaq Composite declined 1.4%.

An earnings-related drop in Amazon.com (AMZN 229.15, -9.68, -4.1%), which issued soft Q1 revenue guidance and revealed plans to allocate approximately $100 billion to capital expenditures in 2025, also contributed to the downside action today.

• Dow Jones Industrial Average: +4.1% YTD
• S&P Midcap 400: +2.7% YTD
• Russell 2000: +2.2% YTD
• S&P 500: +2.5% YTD
• Nasdaq Composite: +1.1% YTD

Reviewing today's economic data:

• January Nonfarm Payrolls 143K (Briefing.com consensus 155K); Prior was revised to 307K from 256K, January Nonfarm Private Payrolls 111K (Briefing.com consensus 163K); Prior was revised to 273K from 223K,
• January Avg. Hourly Earnings 0.5% (Briefing.com consensus 0.3%); Prior 0.3%, January Unemployment Rate 4.0% (Briefing.com consensus 4.1%); Prior 4.1%, January Average Workweek 34.1 (Briefing.com consensus 34.3); Prior was revised to 34.2 from 34.3
  • The key takeaway from the report is that it is a good "economic" report as the jump in average hourly earnings on a nominal and real basis is a good portent for consumer spending. The question will be if it is a good "market" report given that the jump in average hourly earnings can be construed as a sticky inflation indicator that will forestall another rate cut by the Fed.
• February Univ. of Michigan Consumer Sentiment - Prelim 67.8 (Briefing.com consensus 71.3); Prior 71.1
  • The key takeaway from the report is that the weakening in sentiment was described as "pervasive" across political, age, and wealth groups, underscoring the worrisome impact of higher inflation expectations.
• December Wholesale Inventories -0.5% (Briefing.com consensus -0.5%); Prior -0.2%