Closing Stock Market Summary
The S&P 500 and Nasdaq Composite closed little changed from yesterday while the Dow Jones Industrial Average and Russell 2000 declined 0.3% and 0.2%, respectively.
The muted finish followed a soft start to the Q4 earnings reporting period, which set a tepid tone as participants look ahead to upcoming earnings results. Dow component UnitedHealth (UNH 521.51, -18.17, -3.4%), Delta Air Lines (DAL 38.47, -3.79, -9.0%), Bank of America (BAC 32.80, -0.35, -1.1%), and Wells Fargo (WFC 47.40, -1.64, -3.3%) were losing standouts in that respect.
JPMorgan Chase (JPM 169.05, -1.25, -0.7%) and Citigroup (C 52.62, +0.54, +1.0%) were also among the notable names that reported earnings. The former initially traded up before rolling over while the latter started out weak and closed with a gain.
Buyers were hesitant after the relatively soft start to earnings season due in part to the fact that the S&P 500 and Dow Jones Industrial Average are trading near all-time highs. The S&P 500 traded above its all-time high close shortly after the open, reaching 4,802.
That initial push higher was partially a reaction to a cooler-than-expected Producer Price Index (PPI) report for December, which ultimately impacted price action in the Treasury market more than the stock market. The 2-yr note yield, which is most sensitive to changes in the fed funds futures market, declined 12 basis points today to 4.15%. The 10-yr note yield fell three basis points to 3.95%.
The pleasing PPI report also had participants recalibrating rate cut expectations. The fed funds futures market now sees a 79.4% probability of a 25 basis points rate cut at the March FOMC meeting versus a 73.2% probability yesterday and a 68.1% probability one week ago.
Notably, rate cut expectations also increased yesterday despite a December Consumer Price Index report that wasn't exactly what the market hoped to see, suggesting the market doesn't believe inflation is likely to reaccelerate.
Geopolitical angst was also part of the narrative today after the United States and the UK conducted strikes against military targets in Houthi-controlled areas of Yemen.
- S&P 500: +0.3%
- Dow Jones Industrial Average: -0.3%
- Nasdaq Composite: -0.3%
- S&P Midcap 400: -1.9%
- Russell 2000: -3.8%
Reviewing today's economic data:
- December PPI -0.1% (consensus 0.1%); Prior was revised to -0.1% from 0.0%; December Core PPI 0.0% (consensus 0.2%); Prior 0.0%
- The key takeaway from the report is that inflation at the wholesale level has been brought under control, with deflation appearing in several components, and is expected to translate into friendlier inflation readings for the PCE Price Index that is the Fed's preferred inflation gauge.
As a reminder, the market will be closed on Monday for Martin Luther King Jr Day.