Closing Stock Market Summary
The stock market experienced a broad retreat today as participants reacted to the latest inflation data. A hotter than expected CPI (actual 0.3%; consensus 0.2%) and core CPI (actual 0.4%; consensus 0.3%) for January fueled selling interest in both the stock and bond markets.
The S&P 500 and Nasdaq Composite saw some mid-day improvement, climbing off early session lows in a move that coincided with NVIDIA (NVDA 721.28, -1.20, -0.2%) trading up as much as 1.7%.
The major indices then spent most of the afternoon trade in a steady drift before a sharp move higher with 30 minutes left in the session drove the S&P 500 from 4920.31 to close at 4953.17.
Ultimately, the S&P 500 fell 1.4% and the Nasdaq Composite registered a 1.8% loss while the Dow Jones Industrial Average sank 500 points.
The Russell 2000 lagged relative to other major indices, dropping 4.0%, due to weakness in regional bank shares that fell under renewed selling pressure today after recent rebound action. This weakness also left the SPDR S&P Regional Banking ETF (KRE) with a 4.2% loss.
Small cap underperformance was also related to worries about growth in a high interest rate environment. The 10-yr note yield, which sat at 4.14% just before the CPI data, settled 14 basis points higher than yesterday at 4.32%. The 2-yr note yield, at 4.44% just before 8:30 ET, jumped 20 basis points today to 4.67%.
Today's robust selling activity left ten of the 11 S&P 500 sectors down at least 1.0%. The rate-sensitive real estate (-1.8%) and utilities (-1.7%) sectors saw some of the largest declines, along with the consumer discretionary sector (-2.0%), which fell under sizable declines in Amazon.com (AMZN 168.64, -3.70, -2.2%) and Tesla (TSLA 184.02, -4.11, -2.2%).
The jump in rates and the hot inflation data created an excuse for profit-taking activity in a market that some participants believe is due for a period of consolidation after a big run that had the S&P 500 and Dow Jones Industrial Average set fresh all-time highs.
- Nasdaq Composite: +4.3% YTD
- S&P 500: +3.8% YTD
- Dow Jones Industrial Average: +1.6% YTD
- S&P Midcap 400: -0.6% YTD
- Russell 2000: -3.1% YTD
Reviewing today's economic data:
- January NFIB Small Business Optimism 89.9; Prior 91.9
- January CPI 0.3% (consensus 0.2%); Prior 0.2%; January Core CPI 0.4% (consensus 0.3%); Prior 0.3%
- The key takeaway from the report is that it gives Fed officials an argument to maintain their hawkish rhetoric and delay the discussion about the initial rate cut.
Wednesday's economic calendar features:
- 7:00 ET: Weekly MBA Mortgage Index (prior 3.7%)
- 10:30 ET: Weekly crude oil inventories (prior +5.52 mln)