Closing Stock Market Summary
The stock market registered broad based losses today. The major indices slid to session lows early in the day in response to a jump in Treasury yields after the 10:00 ET economic data was released. The market regained some upside traction, though, thanks to relative strength in some mega caps and semiconductor stocks.
Still, just about everything declined, leaving the S&P 500 with a 0.3% loss, the Nasdaq Composite down 0.2%, the Dow Jones Industrial Average 0.7% lower, and the Russell 2000 with a 1.3% loss.
Gains in NVIDIA (NVDA 693.32, +31.72, +4.8%), which was reiterated as a Buy and had its price target raised to $800 from $625 at Goldman Sachs, Apple (AAPL 187.68, +1.83, +1.0%), and Alphabet (GOOG 144.93, +1.39, +1.0%), along with outperforming semiconductor shares, helped to limit some index level losses.
The PHLX Semiconductor Index (SOX) jumped 1.2% today, due in part to strength in ON Semiconductor (ON 77.59, +6.76, +9.5%) following pleasing earnings and/or guidance.
Strength in some of the aforementioned names boosted the heavily-weighted S&P 500 information technology sector to a 0.6% gain while nine of the sectors registered a decline. The materials sector was the worst performer, sinking 2.5% on weakness in shares of Air Products (APD 218.02, -40.15, -15.6%) following disappointing earnings.
The overall negative price action in the stock market was largely in response to the price action in Treasuries, which have logged steep declines over the last few sessions in response to ongoing strength in economic data of late that has the market repricing rate cut expectations. This also follows comments from Fed Chair Jerome Powell over the weekend, who said on 60 Minutes that the Fed needs to see more evidence that inflation is moving sustainably down to its 2% target before lowering rates.
This morning's release of the January ISM Services PMI featured an acceleration in services sector activity in January, replete with a pickup in new orders, employment, and prices. The 10-yr note yield, at 4.11% shortly before 10:00 ET, hit 4.18% at its highest level today before settling at 4.16%, which is 13 basis points higher than Friday. The 2-yr note yield, at 4.43% just before 10:00 ET, hit 4.47% at its high before settling at 4.46%.
The implied likelihood of a 25 basis points rate cut at the March FOMC meeting sits at just 16.5% now, down from 20% on Friday and 47.1% one week ago, according to the CME FedWatch Tool.
- S&P 500: +3.9%
- Nasdaq Composite: +3.6%
- Dow Jones Industrial Average: +1.8%
- S&P Midcap 400: -1.6%
- Russell 2000: -4.4%
Reviewing today's economic data:
- The S&P Global U.S. Services PMI rose to 52.5 in the final January reading from 51.4.
- The ISM Services PMI increased to 53.4% in January (consensus 52.0%) from 50.5% in December. The dividing line between expansion and contraction is 50.0%, so the January reading connotes services sector activity expanding at a faster pace than in December. January marked the 13th consecutive month of growth for the services sector.
- The key takeaway from the report is that the largest sector of the U.S. economy saw an acceleration in activity in January that was accompanied by a pickup in new orders, employment, and prices, which isn't the stuff of rate cuts.
Separately, there is no US economic data of note tomorrow.