Closing Stock Market SummaryMarket participants received a much stronger than expected January retail sales report this morning, which reflected continued strength in the economy, but left the market concerned that the Fed will raise rates more than expected. Briefly, total sales in January were up 3.0% month-over-month (Briefing.com consensus 1.7%) and sales, excluding autos, up 2.3% (consensus 0.8%).
Price action in the Treasury market today was indicative of ongoing rate hike concerns. The 10-yr note yield rose five basis points to 3.81%, initially fueling worries about valuation constraints and competition for stocks.
Equities also started the day in retreat mode, but true to 2023 form, investors stepped in to buy the early weakness. The main indices all closed the session at or near their best levels of the day. The rebound in the stock market, in spite of rising market rates, suggests perhaps that buyers were influenced more by the hopeful economic implications of the January retail sales data than its potentially adverse implications for monetary policy.
High-beta stocks, uplifted by the positive earnings news and guidance from the likes of Airbnb (ABNB 137.01, +16.14, +13.4%), Roblox (RBLX 45.08, +9.41, +26.4%), and Analog Devices (ADI 196.18, +13.64, +7.5%), paced today's gains. Several mega cap stocks also offered support to the broader market. Alphabet (GOOG 97.10, +2.15, +2.3%) and Tesla (TSLA 214.24, +4.99, +2.4%) were among the standouts in that regard.
Alphabet and Tesla helped to propel their respective S&P 500 sectors -- communication services (+1.2%) and consumer discretionary (+1.2%) -- to first place on the leaderboard today. Meanwhile, the health care (-0.5%) and energy (-1.8%) sectors were alone in negative territory by the close. The latter was dragged down by a big earnings-driven loss in Devon Energy (DVN 57.23, -6.71, -10.5%).
Notably, small cap stocks performed better than their larger peers today. The Russell 2000 (+1.1%) logged the biggest gain among the major indices.
- Nasdaq Composite: +15.3% YTD
- Russell 2000: +11.3% YTD
- S&P Midcap 400: +10.6% YTD
- S&P 500: +8.0% YTD
- Dow Jones Industrial Average: +3.0% YTD
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index -7.7%; Prior -7.4%
- January Retail Sales 3.0% (consensus 1.7%); Prior -1.1%; January Retail Sales ex-auto 2.3% (consensus 0.8%); Prior was revised to -0.9% from -1.1%
- The key takeaway from the report is that consumers were spending freely on goods in January despite the ongoing inflation pressure; in fact, every single sales category showed a month-over-month increase, led by a 7.2% surge in sales at food services and drinking places.
- February Empire State Manufacturing -5.8 (consensus -19.0); Prior -32.9
- January Industrial Production 0.0% (consensus 0.5%); Prior was revised to -1.0% from -0.7%; January Capacity Utilization 78.3% (consensus 79.1%); Prior was revised to 78.4% from 78.8%
- The key takeaway from the report is that the soft reading for January can be attributed entirely to a drop in the output of utilities. Otherwise, there was some welcome rebound strength in both mining and manufacturing output, the latter of which saw advances in durable, nondurable, and other manufacturing activity.
- December Business Inventories 0.3% (consensus 0.3%); Prior was revised to 0.3% from 0.4%
- February NAHB Housing Market Index 42 (consensus 37); Prior 35
Ahead of tomorrow's open, Crocs (CROX), Hasbro (HAS), Hyatt Hotels (H), Paramount Global (PARA), Shake Shack (SHAK), Toast (TOST), and US Foods (USFD) will headline the earnings reports.
Looking ahead to Thursday, market participants will receive the following economic data:
- 8:30 ET: January Housing Starts (consensus 1.355 mln; prior 1.382 mln), Building Permits (Briefing.com consensus 1.350 mln; prior 1.330 mln), January PPI (consensus 0.4%; prior -0.5%), Core PPI (consensus 0.3%; prior 0.1%), weekly Initial Claims (consensus 203,000; prior 196,000), Continuing Claims (prior 1.688 mln), and February Philadelphia Fed survey (consensus -8.0; prior -8.9)
- 10:30 ET: Weekly natural gas inventories (prior -217 bcf)
