Closing Stock Market Summary
The stock market started, and ended, this session on a positive note. The major indices drifted lower, however, around mid-morning. Early buying activity favored mega cap stocks, aside from Tesla (TSLA 182.63, -25.20, -12.1%) following disappointing earnings and guidance, but the afternoon improvement was powered by gains in the "rest" of the market.
The Invesco S&P 500 Equal Weight ETF (RSP) jumped 1.0% versus a 0.5% gain in the market-cap weighted S&P 500. Meanwhile, the Vanguard Mega Cap Growth ETF (MGK) eked out a 0.2% gain. Apple (AAPL 194.17, -0.33, -0.2%) was another laggard from the mega cap space after confirming changes to iOS, Safari, and the App Store in the European Union.
The overall positive bias today followed pleasing data in terms of ongoing strength in the economy and cooling inflation. The Advance Q4 GDP report showed that real GDP rose 3.3% versus an expected 2.0% and the GDP Price Deflator increased 1.5% versus an expected 2.8%. This comes ahead of the release of the December Personal Income and Spending report at 8:30 ET tomorrow, which features the Fed's preferred gauge on inflation (i.e. the PCE Price Indexes).
Fairly broad based afternoon gains left nine of the S&P 500 sector in positive territory. The energy sector (+2.2%) saw the largest gain, climbing alongside oil prices ($77.36/bbl, +2.29, +3.1%). Meanwhile, the big loss in Tesla pinned the S&P 500 consumer discretionary sector in last place on the leaderboard, down 1.1%, followed by the health care sector (-0.2%), which was driven lower by shares of Humana (HUM 355.36, -47.04, -11.7%) after reporting disappointing quarterly results.
Knight-Swift Transportation (KNX 557.90, +0.92, +1.6%) was among the losing standouts early after reporting quarterly results, but it turned around and recovered to end the day higher. A sizable earnings-related gain in IBM (IBM 190.43, +16.50, +9.5%) was a big reason behind the outperformance of the Dow Jones Industrial Average.
Treasuries settled with gains in response to this morning's pleasing economic data, acting as added support for equities. The 2-yr note yield rose five basis points to 4.32% and the 10-yr note yield climbed five basis points to 4.13%.
- Nasdaq Composite: +3.3%
- S&P 500: +2.6%
- Dow Jones Industrial Average: +1.0%
- S&P Midcap 400: -0.8%
- Russell 2000: -2.5%
Reviewing today's economic data:
- Real GDP increased at an annual rate of 3.3% in the fourth quarter (consensus 2.0%), bolstered by a 2.8% increase in personal consumption expenditures. The GDP Pride Deflator was up just 1.5% following a 3.3% increase in the third quarter.
- The key takeaway from the report is the recognition that inflation pressures calmed in the fourth quarter while the economy once again grew above potential.
- Initial jobless claims for the week ending January 20 increased by 25,000 to 214,000 (consensus 200,000). Continuing jobless claims for the week ending January 13 increased by 27,000 to 1.833 million.
- The key takeaway from the report is that, despite the week-over-week increase, initial jobless claims -- a leading indicator -- continue to run at a level that is well below what is typically seen in a recession period.
- Durable goods orders were unchanged in December (consensus 0.1%) following an upwardly revised 5.5% increase (from 5.4%) in November. Excluding transportation, durable goods orders increased 0.6% (consensus 0.2%) on the heels of a 0.5% increase in November.
- The key takeaway from the report is that new orders were up for most categories outside of defense aircraft and parts, signaling some pickup in manufacturing activity in the final month of the year.
- The Advance Intl. Trade in Goods deficit narrowed to $88.5 billion in December from $89.3 billion in November; Advance Retail Inventories were up 0.8% following a 0.1% increase in November; and Advance Wholesale
- Inventories increased 0.4% following a 0.4% decline in November.
- New home sales increased 8.0% month-over-month in December to a seasonally adjusted annual rate of 664,000 units (consensus 640,000) from an upwardly revised 615,000 (from 590,000) in November. On a year-over-year basis, new home sales were up 4.4%.
- The key takeaway from the report is that new home sales activity increased in December, bolstered by a drop in mortgage rates and a sizable drop in selling prices
Friday's economic calendar features:
- 8:30 ET: December Personal Income (consensus 0.3%; prior 0.4%), Personal Spending (consensus 0.4%; prior 0.2%), PCE Prices (consensus 0.2%; prior -0.1%), and Core PCE Prices (consensus 0.2%; prior 0.1%)
- 10:00 ET: December Pending Home Sales (consensus 2.3%; prior 0.0%)