Closing Stock Market Summary
Today's trade featured a negative bias throughout most of the session despite an initial move higher than saw the S&P 500 run into resistance at its all-time high close (4,796.56). Decliners led advancers by a nearly 2-to-1 margin at the NYSE and by a 4-to-3 margin at the Nasdaq.
The Russell 2000 closed with a 0.8% loss while the three major indices settled little changed from yesterday after climbing off session lows thanks to positive price action in some mega cap stocks. The Vanguard Mega Cap Growth ETF (MGK) was down 0.9% when the indices were near session lows, but the MGK closed with a 0.2% gain.
Market participants were digesting a Consumer Price Index (CPI) report for December that was slightly hotter than the market's hopeful expectations. Total CPI increased 3.4% year-over-year in December, up from 3.1% in November, while the core reading decelerated slightly to 3.9% from 4.0%.
Also, weekly initial jobless claims remain below recession-like levels at 202,000, which is down from 203,000 in the prior week.
The market's rate cut expectations ultimately strengthened despite data that isn't likely to persuade the Fed to cut rates as much as the market hopes, and despite Cleveland Fed President Mester (FOMC voter) saying on BloombergTV that March is probably too early for a rate cut.
The fed funds futures market still pricing in six rate cuts this year, beginning with a 71.4% implied likelihood of a March cut, up from 67.4% that was seen yesterday, according to the CME FedWatch Tool.
Treasuries settled with gains, but buying really picked up in response to a strong $21 bln 30-yr bond reopening rather than this morning's data. The 2-yr note yield fell nine basis points to 4.27% and the 10-yr note yield declined five basis points to 3.98%.
Still, stocks languished under selling pressure despite the increase in rate cut expectations and the positive price action in Treasuries. Nine of the 11 S&P 500 sectors registered a decline. The utilities sector was the worst performer by a decent margin, sinking 2.3%.
In other news, there was a lot of buzz around trading spot Bitcoin ETFs today, and related companies, after the SEC announced yesterday that it had approved 11 spot Bitcoin ETFs.
- S&P 500: +0.2%
- Dow Jones Industrial Average: +0.1%
- Nasdaq Composite: -0.3%
- S&P Midcap 400: -1.8%
- Russell 2000: -3.5%
Reviewing today's economic data:
- December CPI 0.3% (consensus 0.2%); Prior 0.1%; December Core CPI 0.3% (consensus 0.2%); Prior 0.3%
- The key takeaway from the report is that inflation, while improved, has lost some of its downward momentum. Therefore, the Fed isn't likely to be in a rush to cut interest rates -- at least not yet based on this latest CPI reading.
- Weekly Initial Claims 202K (consensus 209K); Prior was revised to 203K from 220K; Weekly Continuing Claims 1.834 mln; Prior was revised to 1.868 mln from 1.855 mln
- The key takeaway from the report is the recognition that employers, in general, are still reluctant to cut employees from payrolls. That is a positive consideration as it relates to the outlook for labor and the economy, which means it may not be a positive consideration as it relates to the market's outlook for rate cuts.
Friday's economic data is limited to the December PPI (consensus 0.1%; prior 0.0%) and Core PPI (consensus 0.2%; prior 0.1%) at 8:30 ET.