Closing Stock Market SummaryIt was another strong session for the broader market as investors digested the latest slate of earnings news, although a sizable loss in Merck (MRK 103.46, -3.52, -3.3%) following its quarterly results kept the price-weighted Dow Jones Industrial Average in negative territory for most of the session. The Nasdaq Composite (+3.2%) led the upside charge thanks to a huge earnings-driven gain in Meta Platforms (META 188.77, +35.65, +23.3%).
Meta's pleasing results on the heels of Fed Chair Powell's press conference, where he took a less aggressive tone, fueled a sense that earnings growth and monetary policy may be better than feared this year.
Other mega cap stocks registered outsized gains in solidarity with Meta, bolstering the broader market. The Vanguard Mega Cap Growth ETF (MGK) rose 3.2% versus a 1.1% gain in the Invesco S&P 500 Equal Weight ETF (RSP) and a 1.5% gain in the S&P 500.
Positive reactions to some data releases this morning also helped along the upside bias. A pleasing Q4 Productivity report, which featured a moderation in unit labor costs, left the market feeling good about inflation trends. Separately, weekly initial jobless claims hit their lowest level (183,000) since April 2022, but that did not deter the rally effort, as it was construed as another good portent for a possible soft landing.
The rally did hit an air pocket, though, when the S&P 500 failed to clear the 4,200 level. The pullback was likely driven by a feeling that the market had gotten overbought/overextended and was due for some consolidation. The downturn did not last long, however, and the main indices were able to climb back towards session highs ahead of the closing bell.
Most of the S&P 500 sectors logged a gain today. The communication services sector (+6.7%) held the top spot a wide margin, followed by consumer discretionary (+3.1%) and information technology (+2.8%). The energy sector (-2.5%), meanwhile, was the worst performer as oil prices continued to lose ground ($75.68/bbl, -1.14, -1.5%).
Treasury yields pulled back noticeably yesterday in response to Fed Chair Powell's comments, but ultimately settled today's session little changed. The 2-yr note yield fell three basis points to 4.08% and the 10-yr note yield was unchanged at 3.40%.
- Nasdaq Composite: +16.6% YTD
- Russell 2000: +13.6% YTD
- S&P Midcap 400: +12.2% YTD
- S&P 500: +8.9% YTD
- Dow Jones Industrial Average: +2.7% YTD
Reviewing today's economic data:
- Weekly Initial Claims 183K (consensus 201K); Prior 186K; Weekly Continuing Claims 1.655 mln; Prior was revised to 1.666 mln from 1.675 mln
- The key takeaway from the report is that the low level of initial claims is an encouraging signal for the labor market, which, in light of Fed Chair Powell's comments yesterday, is not the scare factor for the market that it has been in the past. On the contrary, the default view for the market now is to perceive it as good portent for a soft landing.
- Q4 Productivity-Prel 3.0% ( consensus 2.5%); Prior was revised to 1.4% from 0.8%; Q4 Unit Labor Costs-Prel 1.1% (consensus 1.5%); Prior was revised to 2.0% from 2.4%
- The key takeaway from the report is that the pickup in productivity helped tame unit labor costs, which is something the Fed will be pleased to see.
- December Factory Orders 1.8% (consensus 2.2%); Prior was revised to -1.9% from -1.8%
- The key takeaway from the report is that it shows manufacturing activity was otherwise weak in December when nondefense aircraft and parts orders are removed from the equation.
ArcBest (ARCB), Church & Dwight (CHD), Cigna (CI), Regeneron Pharma (REGN), and Zimmer Biomet (ZBH) headline the earnings reports ahead of tomorrow's open.
Looking ahead to Friday, market participants will receive the following economic data:
- 8:30 ET: January Nonfarm Payrolls (consensus 190,000; prior 223,000), Nonfarm Private Payrolls (consensus 175,000; prior 220,000), Unemployment Rate (Briefing.com consensus 3.6%; prior 3.5%), Average Hourly Earnings ( consensus 0.3%; prior 0.3%), and Average Workweek consensus 34.4; prior 34.3)
- 9:45 ET: Final January IHS Markit Services PMI (prior 46.6)
- 10:00 ET: January ISM Non-Manufacturing Index (consensus 50.3%; prior 49.6%)
