Closing Stock Market Summary
Today's trade featured a negative bias. The major indices were able to close off their lows, though, thanks to a push higher in the last half hour of trading. The late afternoon improvement, which left the S&P 500 and Nasdaq Composite near their best levels of the day, was largely driven by mega cap stocks making upside moves.
The Vanguard Mega Cap Growth ETF (MGK) was down as much as 1.5% earlier, closed near its best level of the session with a 0.5% loss. Meta Platforms (META 368.37, +0.91, +0.3%) eked out a slim gain after being down as much as 2.4%.
The overall negative vibe was related to rising market rates and a recalibration of the market's optimistic rate cut view. The 2-yr note yield jumped 14 basis points to 4.36% and the 10-yr note yield climbed four basis points to 4.11%.
Activity in the Treasury market was partially a reaction to this morning's release of the December retail sales report, which did not go the market's way. That is to say, consumer spending was slightly better than expected in December and not likely to persuade the Fed to cut rates as much, or as early, as the market hopes.
On a related note, European Central Bank President Lagarde echoed recent comments by other central bankers, saying rate cuts are likely to begin this summer, according to FT.
The fed funds futures market is now pricing in a 59.1% probability of a 25 basis points rate cut at the March FOMC meeting versus a 66.9% probability yesterday, according to the CME FedWatch Tool.
Still, selling activity was fairly modest, suggesting market participants are simply hesitant to buy at this level rather than anxious to sell. The Invesco S&P 500 Equal Weight ETF (RSP) declined 0.8%.
The S&P 500 financial sector closed with a 0.3% decline after some components reported quarterly results since yesterday's close. Charles Schwab (SCHW 63.45, -0.86, -1.3%) and U.S. Bancorp (USB 40.82, -0.56, -1.4%) were influential laggards from the sector after their quarterly results while Citizens Financial Group (CFG 31.73, +0.53, +1.7%) went against the grain with a gain.
Meanwhile, the rate-sensitive real estate sector (-1.9%) saw the largest decline.
- S&P 500: -0.6%
- Nasdaq Composite: -1.0%
- Dow Jones Industrial Average: -1.1%
- S&P Midcap 400: -3.2%
- Russell 2000: -5.6%
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index 10.4%; Prior 9.9%
- December Retail Sales 0.6% (consensus 0.4%); Prior 0.3%; December Retail Sales ex-auto 0.4%; Prior 0.2%
- The key takeaway from the report is that consumer spending remained healthy in the final month of 2023, which does not strengthen the argument for an imminent start to a rapid rate cut campaign by the FOMC.
- December Export Prices -0.9%; Prior -0.9%
- December Export Prices ex-ag. -0.9%; Prior -1.0%
- December Import Prices 0.0%; Prior was revised to -0.5% from -0.4%
- December Import Prices ex-oil 0.0%; Prior was revised to 0.1% from 0.2%
- December Industrial Production 0.1% (consensus -0.1%); Prior was revised to 0.0% from 0.2%; December Capacity Utilization 78.6% (consensus 78.8%); Prior was revised to 78.6% from 78.8%
- The key takeaway from the report is that output remained relatively steady in December, though it followed downward revisions to November's production rate and capacity utilization.
- November Business Inventories -0.1%; Prior -0.1%
- January NAHB Housing Market Index 44 (consensus 38); Prior 37
Thursday's economic calendar features:
- 8:30 ET: Weekly Initial Claims (consensus 206,000; prior 202,000), Continuing Claims (prior 1.834 mln), December Housing Starts (consensus 1.417 mln; prior 1.560 mln), and Building Permits (consensus 1.478 mln; prior 1.460 mln)
- 10:30 ET: Weekly natural gas inventories (prior -140 bcf)
- 11:00 ET: Weekly crude oil inventories (prior +1.34 mln)