Stock Market Update

[BRIEFING.COM] The stock market started the session on solid footing. The major indices were moving higher, bolstered by mega cap gains and not reacting much to the January Employment Situation report at 8:30 ET. 

The jobs report was good overall and showed an increase in nonfarm payrolls, including revisions, and a historically low 4.0% unemployment rate. The market also took the 0.5% increase in average hourly earnings, which may not bode well for inflation, in stride. The S&P 500 was up as much as 0.3% and the Nasdaq Composite traded up as much 0.4% after the open.

The vibe suddenly shifted at 10:00 ET when the preliminary February University of Michigan Consumer Sentiment survey was released. The headline number was weaker than expected (actual 67.8; expected 71.3) and year-ahead inflation expectations jumped to 4.3% (from 3.3%). 

The survey fueled selling in the Treasury market, adding more pressure to equities. The 10-yr yield is up six basis points to 4.50% and the 2-yr yield is up seven basis points to 4.28%.

A second wave of selling hit the stock market, coinciding with a report that President Trump told Republican lawmakers that he plans to issue additional reciprocal tariffs as soon as today, according to Reuters. The added concern is the potential for political shifts to happen over the weekend when market participants won't be able to react in real-time. The S&P 500 is 0.7% lower than yesterday and the Nasdaq Composite sports a 1.1% decline, trading near their worst levels of the day.

The earnings-related decline in Amazon.com (AMZN 229.78, -9.04, -3.8%), which issued soft Q1 revenue guidance and announced a plan to spend approximately $100 billion on capex in 2025, has also contributed to downside action today.

The price action in AMZN has pinned the S&P 500 consumer discretionary sector to last place on the leaderboard, showing a 1.9% decline. The only sector trading higher is energy (+0.6%).

Reviewing today's economic data:

• January Nonfarm Payrolls 143K (Briefing.com consensus 155K); Prior was revised to 307K from 256K, January Nonfarm Private Payrolls 111K (Briefing.com consensus 163K); Prior was revised to 273K from 223K,
• January Avg. Hourly Earnings 0.5% (Briefing.com consensus 0.3%); Prior 0.3%, January Unemployment Rate 4.0% (Briefing.com consensus 4.1%); Prior 4.1%, January Average Workweek 34.1 (Briefing.com consensus 34.3); Prior was revised to 34.2 from 34.3
  • The key takeaway from the report is that it is a good "economic" report as the jump in average hourly earnings on a nominal and real basis is a good portent for consumer spending. The question will be if it is a good "market" report given that the jump in average hourly earnings can be construed as a sticky inflation indicator that will forestall another rate cut by the Fed.
• February Univ. of Michigan Consumer Sentiment - Prelim 67.8 (Briefing.com consensus 71.3); Prior 71.1
  • The key takeaway from the report is that the weakening in sentiment was described as "pervasive" across political, age, and wealth groups, underscoring the worrisome impact of higher inflation expectations.
• December Wholesale Inventories -0.5% (Briefing.com consensus -0.5%); Prior -0.2%