Closing Stock Market SummaryThe stock market retreat continued today, building on Wednesday's sizable losses. Today's negative bias was fueled by lingering growth and rate hike concerns following a slate of economic data this morning.
Weekly initial claims (actual 190,000; consensus 212,000) decreased to their lowest level since late September, implying no new difficulties in the labor market that could put a quick stop to the Fed's hiking cycle.
At the same time, investors received weak building permits data for December (actual 1.330 mln; consensus 1.370 mln), highlighting the deteriorating economic backdrop and rising risk of a policy mistake triggering a deeper setback. However, that report contained one positive element, as single-family starts grew 11.3% month-over-month.
Piling onto the market's concerns, JPMorgan Chase CEO Jamie Dimon said in a CNBC interview this morning "I think there's a lot of underlying inflation, which won't go away so quick," adding that he thinks rates will top 5.0%.
In addition to the aforementioned growth and rate hike worries, there may have been an element of profit taking behind the recent weakness after a big run to start 2023. Including today's losses, the S&P 500 and Nasdaq Composite are still up 1.6% and 3.7%, respectively, this year.
The main indices were pinned in negative territory for the entire session, but there was a recovery attempt in the afternoon trade that seemed to coincide with Fed Vice Chair Brainard giving a speech. Ms. Brainard's remarks did not include anything surprising. She said "Even with the recent moderation, inflation remains high, and policy will need to be sufficiently restrictive for some time to make sure inflation returns to 2 percent on a sustained basis."
The recovery attempt didn't last, however, and the main indices faded from session highs ahead of the closing bell.
Most of the S&P 500 sectors traded down with the industrial (-2.1%) sector showing the steepest loss. Other influential laggards included the consumer discretionary (-1.7%), financial (-1.2%), and information technology (-1.1%) sectors.
The energy sector (+1.1%) led the outperformers amid rising oil prices. WTI crude oil futures rose 1.5% to $80.73/bbl.
Treasury yields made relatively small upside moves today. The 2-yr note yield rose three basis points to 4.12% and the 10-yr note yield rose two basis points to 3.40%.
In an expected development, Treasury Secretary Yellen notified Congress via a letter that the debt ceiling has been reached, prompting the Treasury Department to begin employing extraordinary measures.
- Russell 2000: +4.3% YTD
- Nasdaq Composite: +3.7% YTD
- S&P Midcap 400: +3.6% YTD
- S&P 500: +1.6% YTD
- Dow Jones Industrial Average: -0.3% YTD
Reviewing today's economic data:
- Initial jobless claims for the week ending January 14 decreased by 15,000 to 190,000 ( consensus 212,000). Continuing jobless claims for the week ending January 7 increased by 17,000 to 1.647 million.
- The key takeaway from the report is that new claims were at their lowest level since late September, implying no new difficulties in the labor market that could put a quick stop to the Fed's hiking cycle.
- Total housing starts declined 1.4% month-over-month in December to a seasonally adjusted annual rate of 1.382 million units ( consensus 1.355 million) while total building permits declined 1.6% month-over-month to a seasonally-adjusted annual rate of 1.330 million ( consensus 1.370 million).
- The key takeaway from the report is that new single-family starts increased by 11.3% month-over-month even though total starts recorded a month-over-month decrease. This element lends some optimism regarding a sector that has been pressured by rising rates and decreasing affordability. That said, building permits, which have a leading indicator status, decreased for the third consecutive month.
- The Philadelphia Fed Index fell to -8.9 in January ( consensus -11.0) from -13.8 in December.
- Weekly EIA Natural Gas Inventories showed a draw of 82 bcf versus a build of 11 bcf last week.
- Weekly Crude Oil Inventories showed a build of 8.41 million barrels after a build of 18.96 million barrels last week.
Economic data tomorrow is limited to the December Existing Home Sales ( consensus 3.96 million; prior 4.09 million) at 10:00 a.m. ET.