Stock Market Update

[BRIEFING.COM] Stocks finished mostly lower today as a sharp increase in oil prices put pressure on the broader market after showing signs of stabilization yesterday. The S&P 500 (-0.6%), Nasdaq Composite (-0.3%), and DJIA (-1.6%) ticked lower for the majority of the session as investors weighed concerns about how the higher fuel prices might weigh on margins or inflation readings, though they finished well off of their worst levels of the session.

Crude oil settled today's session $6.27 higher (+8.4%) at $80.97 per barrel, its highest closing level since July 2024. Reports circulated that Iran claimed to have struck a U.S. oil tanker in the Persian Gulf, though that has yet to be confirmed. What is certain, however, is that tanker traffic through the Strait of Hormuz remains at a near standstill. 

Oil prices have come down from their highest levels after the futures settlement in reaction to several headlines. Bloomberg reported that the Trump administration is "considering everything" to bring down oil prices, which follows the president's call on Tuesday for the U.S. International Development Finance Corporation to insure tankers traveling through the region while touting the possibility of a U.S. Navy escort. 

Additionally, Reuters reported that China is engaged in discussions with Iran to allow the safe passage of oil and natural gas tankers through the strait. 

The developments helped the major averages finish considerably above their session lows, with the Nasdaq Composite finishing the session in positive week-to-date territory. 

Weakness was still relatively broad, with only three S&P 500 sectors charting a higher finish. 

The energy sector (+0.6%) unsurprisingly finished as the top-performer, though it too spent a considerable amount of time below its flatline today. 

The top-weighted information technology sector (+0.4%) also notched a gain supported by another strong rally in software names such as Intuit (INTU 466.79, +26.65, +6.05%) and ServiceNow (NOW 120.39, +6.53, +5.74%), sending the iShares GS Software ETF 2.3% higher. 

The PHLX Semiconductor Index finished 1.2% lower, though Broadcom (AVGO 332.74, +15.21, +4.79%) was a standout after a solid earnings report. 

The consumer discretionary sector (+0.3%) rounds out the three sectors to finish higher. Amazon (AMZN 218.94, +2.12, +0.98%) was one of the better-performing mega-cap names today, while Expedia Group (EXPE 251.54, +29.81, +13.44%) and Booking Holdings (BKNG 4613.28, +359.70, +8.46%) finished sharply higher after The Information reported that OpenAI is dialing back plans to integrate direct travel booking functionality into ChatGPT.

As for today's laggards, losses were broad and steepest among some of this year's best-performing sectors. 

Defensive sectors were among the underperformers, with the consumer staples (-2.4%) and health care (-2.0%) sectors both finishing near the bottom of the leaderboard. Walmart (WMT 123.32, -4.49, -3.51%) faced pressure after being downgraded to Hold from Buy at Erste Group, while Costco (COST 982.57, -24.17, -2.40%) also lagged ahead of its earnings release.

The materials sector (-2.3%) finished similarly despite a nice rebound in its chemical names as metal prices pulled back today. 

The industrials sector (-2.2%) rounds out the four S&P 500 sectors to finish with a loss of 2.0% or wider, with airline names and UPS (UPS 104.05, -6.45, -5.84%) among the laggards amid higher fuel prices. 

Outside of the S&P 500, the Russell 2000 (-1.9%) and S&P Mid Cap 400 (-1.4%) underperformed in comparison to the major averages. 

Ultimately today was a step back for equities after yesterday's brief stabilization of oil prices fueled the narrative that the market would be able to maintain resilience despite the conflict in Iran. While stocks finished well off of their session lows, the late upward momentum was contingent on headlines that tanker traffic through the Strait of Hormuz will be addressed meaningfully before affecting global oil supply. Until that comes to fruition, the surge in oil prices poses a major overhang to the market, and with each additional day that crude prices push higher, the risk grows that the move begins to feed through to transportation costs, input prices, and ultimately inflation readings.

U.S. Treasuries retreated for the fourth consecutive day, and once again, the long bond fared better than shorter tenors, but it also finished in the red. The 2-year note yield settled up six basis points to 3.60%, the 10-year note yield settled up seven basis points to 4.15%, and the 30-year note yield settled up four basis points to 4.75%.

• S&P Mid Cap 400: +5.7% YTD
• Russell 2000: +4.2% YTD
• S&P 500: -0.2% YTD
• DJIA: -0.2% YTD
• Nasdaq Composite: -2.1% YTD

Reviewing today's data:

• Q4 Productivity-Prel 2.8% (Briefing.com consensus 4.0%); Prior was revised to 5.2% from 4.9%, Q4 Unit Labor Costs- Prel 2.8% (Briefing.com consensus 0.2%); Prior was revised to -1.8% from -1.9%
  • The key takeaway from the report is that the productivity increase itself was pretty solid, yet that consideration was offset by the comparable jump in unit labor costs that aren't going to help ease concerns about sticky inflation pressures.
• Weekly Initial Claims 213K (Briefing.com consensus 216K); Prior was revised to 213K from 212K, Weekly Continuing Claims 1.868 mln; Prior was revised to 1.822 mln from 1.833 mln
  • The key takeaway from the report will be the continuing low level of initial jobless claims, which connotes a labor market that is slow to fire employees.
• January Import Prices 0.2%; Prior was revised to 0.2% from 0.1%
• January Import Prices ex-oil 0.5%; Prior was revised to 0.2% from 0.4%
• January Export Prices 0.6%; Prior was revised to 0.6% from 0.3%
• January Export Prices ex-ag. 0.7%; Prior was revised to 0.7% from 0.3%