Stocks close mixed despite soothing stimulus news, Fed comments
16-Dec-20 16:15 ET
Dow -44.77 at 30154.48, Nasdaq +63.13 at 12658.10, S&P +6.55 at 3701.18 https://www.briefing.com/stock-market-update
[BRIEFING.COM] The S&P 500 (+0.2%) edged higher on Wednesday, as investors were content to hear that a stimulus deal is close to being reached and that the Fed remained committed to its dovish monetary policy framework. The Nasdaq Composite (+0.5%) closed at a record high, while the Dow Jones Industrial Average (-0.2%) and Russell 2000 (-0.4%) closed lower.
The consumer discretionary (+1.1%) and information technology (+0.7%) sectors led the market higher, but the broader market was generally mixed as investors had largely anticipated these events during yesterday's rally. The utilities (-1.2%), industrials (-0.6%), energy (-0.4%), and materials (-0.3%) sectors closed lower.
Specifically, the Fed kept rates near zero as expected and signaled that it will remain there through 2023, increased its forecast for 2021 GDP growth to 4.2% from 4.0%, and said it will continue to purchase at least $120 billion of Treasury and mortgage-backed securities per month until substantial progress has been made with respect to employment and inflation.
The "extraordinarily accommodative" monetary policy, to quote Fed Chair Powell, should reassure the market in the 2021 recovery narrative, especially since the central bank expects any vaccine-induced inflation to be short-lived. Additional fiscal support is still needed, but the wait could soon be over before week's end.
Reports indicated that congressional leadership is close to reaching a $900 billion stimulus deal that includes direct paychecks, enhanced unemployment benefits, small business relief, and funding for the paycheck protection program. State and local aid and liability protection are reportedly not included.
The prior bipartisan proposal didn't mention direct payments to households, so that inclusion in this potential deal had a positive effect on shares of Amazon (AMZN 3240.96, +75.84, +2.4%) and Shopify (SHOP 1157.31, +83.21, +7.8%). On a related note, total retail sales declined 1.1% m/m in November (Briefing.com consensus -0.2%) on top of a downwardly revised 0.1% decline (from +0.3%) in October.
U.S. Treasuries finished near their flat lines in a tight-ranged session that supported the view that the market wasn't surprised by the stimulus update or the Fed. The 2-yr yield was flat at 0.12%, and the 10-yr yield was flat at 0.92%. The U.S. Dollar Index decreased 0.2% to 90.32. WTI crude futures increased 0.5%, or $0.24, to $47.83/bbl.
Reviewing Wednesday's economic data:
Total retail sales declined 1.1% m/m in November (Briefing.com consensus -0.2%) on top of a downwardly revised 0.1% decline (from +0.3%) in October. Retail sales, excluding autos, declined 0.9% (Briefing.com consensus +0.1%) after declining a downwardly revised 0.1% (from +0.2%) in October.
The key takeaway from the report was that the sales declines were broad based. Building materials (+1.1%), food and beverage stores (+1.6%), and nonstore retailers (+0.2%) were the only major categories that saw m/m increases.
The NAHB Housing Market Index decreased to two points to 86 in December (Briefing.com consensus 88).
Business inventories increased 0.7% in October (Briefing.com consensus 0.6%) following an upwardly revised 0.8% increase in October (from 0.7%).
The preliminary IHS Markit Manufacturing PMI for December decreased to 56.5 from 56.7 in November, while the Services PMI decreased to 55.3 from 58.4 in November.
The weekly MBA Mortgage Applications Index increased 1.1% following a 1.2% decline in the prior week.
Looking ahead, investors will receive weekly Initial and Continuing Claims, Housing Starts and Building Permits for November, and the Philadelphia Fed Index for December on Thursday.
Nasdaq Composite +41.1% YTD
Russell 2000 +17.0% YTD
S&P 500 +14.6% YTD
Dow Jones Industrial Average +5.7% YTD
Dow 30154.48 -44.77 (-0.15%)
Nasdaq 12658.10 +63.13 (0.50%)
SP 500 3701.18 +6.55 (0.18%)
10-yr Note -1/32 0.928
NYSE Adv 1429 Dec 1670 Vol 953.3 mln
Nasdaq Adv 1756 Dec 1887 Vol 4.5 bln
Strong: Consumer Discretionary, Information Technology, Real Estate
Weak: Energy, Industrials, Materials
Moving the Market
-- Fed maintains dovish monetary policy framework
-- Reports indicate that a $900 billion stimulus deal is close to being reached
-- Retail sales for November weaker than expected
WTI crude futures edge higher
16-Dec-20 15:25 ET
Dow -1.39 at 30197.86, Nasdaq +77.95 at 12672.92, S&P +12.36 at 3706.99
[BRIEFING.COM] The S&P 500 continues to trade higher by 0.3% while the Russell 2000 is struggling with a 0.2% decline.
One last look at the S&P 500 sectors shows information technology (+0.9%) and consumer discretionary (+1.2%) up more than 1.0% amid strength in their mega-cap components, while the utilities (-0.8%) and industrials (-0.3%) sectors underperform in negative territory.
Separately, Fed Chair Powell recently said that any unleashing of pent-up demand driven by vaccinations would likely have the markings of being a transient pickup in inflation. In other words, he doesn't expect any vaccine-induced inflation to be lasting.
WTI crude futures settled higher by 0.5%, or $0.24, to $47.83/bbl.