Stock Market Update

[BRIEFING.COM] The stock market closed on a positive note after a sharp dip and quick recovery in the afternoon trade after President Trump told reporters that he will impose 25% tariffs on Canada and Mexico beginning Saturday due to immigration, trade deficits, and fentanyl, according to Bloomberg.

The S&P 500 logged a 0.5% gain, the Nasdaq Composite closed 0.3% higher, and the Dow Jones Industrial Average registered a 0.4% gain while the Russell 2000 outperformed, jumping 1.1%.  

A solid earnings-related decline in Microsoft (MSFT 414.99, -27.34, -6.2%) was overshadowed by positive responses to earnings results from the likes of IBM (IBM 258.27, +29.64, +13.0%), Meta Platforms (META 687.00, +10.51, +1.6%), and Tesla (TSLA 400.28, +11.18, +2.9%).

The upside bias in equities was also supported by the price action in Treasuries. 10-yr yield settled four basis points lower at 4.52% and the 2-yr yield settled three basis points lower at 4.20%.

Broad buying interest led the equal-weighted S&P 500 to close 1.1% higher and ten of the S&P 500 sectors to close in the green. The lone holdout in the red was information technology while the rate-sensitive utilities (+2.1%) and real estate (+1.4%) sectors rose to the top of the leaderboard.

Market participants were also digesting this morning's economic releases, which featured an encouragingly low level of initial jobless claims (207,000) for the week ending January 25 and a refreshingly strong 4.2% growth rate for personal spending in the fourth quarter, which was the best since Q1 2023.

The market will be focused on earnings news from influential names this afternoon followed by tomorrow's release of the December Personal Income and Spending report, which includes the Fed's preferred gauge on inflation (PCE Price Indexes) at 8:30 ET. 

• Dow Jones Industrial Average: +5.5.% YTD
• S&P Midcap 400: +4.7% YTD
• Russell 2000: +3.5% YTD
• S&P 500: +3.2% YTD
• Nasdaq Composite: +1.9% YTD

Reviewing today's economic data: 

• Q4 GDP-Adv. 2.3% (Briefing.com consensus 2.3%); Prior 3.1%, Q4 GDP Deflator-Adv. 2.2% (Briefing.com consensus 2.4%); Prior 1.9%
  • The key takeaway from the report is that there were stronger growth attributes in the fourth quarter than the headline number suggests. To that end, personal consumption expenditures were up 4.2% -- the strongest since Q1 2023 -- and real final sales of domestic product, which excludes the change in private inventories, was up 3.2%.
• Weekly Initial Claims 207K (Briefing.com consensus 221K); Prior 223K, Weekly Continuing Claims 1.858 mln; Prior was revised to 1.900 mln from 1.899 mln
  
  • The key takeaway from the report is the low level of initial jobless claims -- a leading indicator -- which is a good signal for growth prospects, as it conveys a reluctance on the part of employers to let employees go.
• December Pending Home Sales -5.5% (Briefing.com consensus 0.8%); Prior was revised to 1.6% from 2.2%

Looking ahead to Friday, market participants receive the following economic data:

• 08:30 ET: December Personal Income (Briefing.com consensus 0.4%; prior 0.3%), December Personal Spending (Briefing.com consensus 0.5%; prior 0.4%), December PCE Price Index (Briefing.com consensus 0.3%; prior 0.1%), December Core-PCE Price Index (Briefing.com consensus 0.2%; prior 0.1%), Q4 Employment Cost Index (Briefing.com consensus 0.9%; prior 0.8%)
• 09:45 ET: January Chicago PMI (Briefing.com consensus 41.5; prior 36.9)