Closing Stock Market SummaryThe stock market traded in mixed fashion today as investors digested the January Consumer Price Index (CPI).
Briefly, total CPI increased 0.5% month-over-month (consensus 0.5%) following last month's upwardly revised 0.1% increase (from -0.1%) and core-CPI, which excludes food and energy, increased 0.4% month-over-month (consensus 0.4%) on top of last month's upwardly revised 0.4% increase (from 0.3%). On a year-over-year basis, total CPI was up 6.4% -- the smallest 12-month increase since the period ending October 2021 -- and core-CPI was up 5.6% -- the smallest 12-month increase since December 2021.
Still, the year-over-year levels were not as low as expected; and it didn't escape notice that services inflation, less energy services, accelerated to 7.2% year-over-year from 7.0% in December.
The Treasury market had a stronger reaction initially with market participants cognizant that this report won't convince the Fed to pause its rate hikes yet and it certainly won't convince the Fed that a rate cut might be in order this year. The 2-yr note yield, which stood at 4.50% just before the report, surged to 4.66% before settling the session at 4.63%. The 10-yr note yield, at 3.68% before the report, surged to 3.79% before settling the session at 3.76%.
The stock market looked less resolute in its thought process. The main indices moved higher shortly after the open with investors seemingly still willing to buy on weakness before the early gains faded and the S&P 500 briefly slipped below the 4,100 level. As yields pulled back from their highs, the major indices were able to bounce somewhat and close the session well above their intraday lows.
The Nasdaq closed with a decent gain today thanks to an upside pull from several mega cap stocks. The Vanguard Mega Cap Growth ETF (MGK) was up 0.5% versus a 0.2% loss in the Invesco S&P 500 Equal Weight ETF (RSP).
Most of the S&P 500 sectors registered a decline with real estate (-1.0%) and consumer staples (-0.9%) sinking the bottom of the pack. The heavily weighted information technology (+0.4%) and consumer discretionary (+1.2%) sectors led the outperformers.
Market internals also reflected mixed action under the surface. Decliners led advancers at the Nasdaq while advancers were roughly in line with decliners at the NYSE.
- Nasdaq Composite: +14.3% YTD
- Russell 2000: +10.1% YTD
- S&P Midcap 400: +9.9% YTD
- S&P 500: +7.7% YTD
- Dow Jones Industrial Average: +2.8% YTD
Reviewing today's economic data:
- Total CPI increased 0.5% month-over-month (consensus 0.5%) following last month's upwardly revised 0.1% increase (from -0.1%) and core-CPI, which excludes food and energy, increased 0.4% month-over-month (consensus 0.4%) on top of last month's upwardly revised 0.4% increase (from 0.3%). The index for shelter accounted for nearly half of the monthly all items increase.
- On a year-over-year basis, total CPI was up 6.4% -- the smallest 12-month increase since the period ending October 2021 -- and core-CPI was up 5.6% -- the smallest 12-month increase since December 2021. Still, the year-over-year levels were not as low as expected.
- The key takeaway from the report is that there has been a clear deceleration from peak inflation; however, the inflation rates are not nearly low enough to suggest the Fed would even be thinking about cutting rates this year.
Some of the companies reporting earningsahead of tomorrow's open include: Kraft Heinz(KHC), Analog Devices (ADI), Biogen (BIIB), Roblox (RBLX), The Trade Desk (TTD), Ryder System (R), and Generac (GNRC).
Market participants will receive the following economic data on Wednesday:
- 7:00 ET: Weekly MBA Mortgage Index (prior 7.4%)
- 8:30 ET: January Retail Sales (consensus 1.7%; prior -1.1%), Retail Sales ex-auto (consensus 0.8%; prior -1.1%), and February Empire State Manufacturing Survey (consensus -19.0; prior -32.9)
- 9:15 ET: January Industrial Production (consensus 0.5%; prior -0.7%) and Capacity Utilization (consensus 79.1%; prior 78.8%)
- 10:00 ET: December Business Inventories (consensus 0.3%; prior 0.4%) and February NAHB Housing Market Index (consensus 37; prior 35)
- 10:30 ET: Weekly crude oil inventories (prior 2.42 mln)
- 16:00 ET: December net Long-Term TIC Flows (prior $171.5 bln)
