Upbeat Start Gives Way to Late Slide
14-Jan-21 16:15 ET
Dow -68.95 at 30991.46, Nasdaq -16.31 at 13112.65, S&P -14.30 at 3795.54 https://www.briefing.com/stock-market-update
[BRIEFING.COM] The major averages finished Thursday on a modestly lower note after surrendering their opening gains. The S&P 500 fell 0.4% while the Dow (-0.2%) and Nasdaq (-0.1%) recorded slimmer losses after touching fresh intraday record highs. Small caps continued their hot start to the year as the Russell 2000 jumped 2.1%.
The trading day started with modest gains, aided by reports of $2 trillion in planned spending by the incoming administration. However, the opening push ran out of steam during the first hour of action, leaving the door open for a pullback from highs that accelerated into the close. The overall movement was limited in scope as the action unfolded in a 31-point range in the S&P 500.
Seven out of eleven sectors ended in the red with technology (-1.0%), consumer discretionary (-0.7%), and communication services (-0.8%) leading the market lower after keeping it afloat in early trade.
The underperformance among these sectors was owed to losses in the largest components by weight with names like Microsoft (MSFT 213.02, -3.32, -1.5%), Visa (V 201.86, -7.49, -3.6%), Amazon (AMZN 3127.47, -38.42, -1.2%), and Alphabet (GOOG 1740.18, -14.22, -0.8%) finding resistance near their respective 50-day moving averages.
Technology's underperformance overshadowed another strong showing from chipmakers. Taiwan Semiconductor Manufacturing Company (TSM 126.45, +7.22, +6.1%), which is the world's largest contract chip foundry, reported strong results, issued upbeat guidance, and announced big spending plans, boding well for other names in the PHLX Semiconductor Index (+2.1%).
The afternoon pressure on the market's heavyweights intensified after Fed Chairman Powell reiterated during a speech that a rate hike will not be considered for a long time. However, the selling did not have a meaningful impact on financials (+0.5%), or sectors that would benefit from commodity inflation like energy (+3.0%) and industrials (+0.3%). The energy sector extended this week's gain to 7.5% largely due to continued support from its largest component—Exxon Mobil (XOM 50.31, +1.89, +3.9%)—after the stock was upgraded to Overweight from Equal Weight with a $56 target at Barclays. Crude oil, meanwhile, rallied $0.67, or 1.3%, to $53.59/bbl.
Bank stocks benefited from more curve steepening, as the 2s30s spread expanded by three basis points to 171 bps while the 2s10s spread expanded by two basis points to 97 bps. Citigroup (C 69.01, +2.15, +3.2%) and Wells Fargo (WFC 34.75, +0.95, +2.8%) hit their best levels in ten months while JPMorgan Chase (JPM 141.17, +0.82, +0.6%) touched a fresh record high ahead of tomorrow's release of their Q4 results.
Treasuries finished on their lows, sending the 10-yr yield higher by four basis points to 1.13%.
Economic data released today was limited to jobless claims and import/export prices:
For the week ending January 9, initial claims spiked by 181,000 to 965,000 (Briefing.com consensus 780,000). That's the highest claims number since August. Continuing claims for the week ending January 2 increased by 199,000 to 5.271 million.
The key takeaway from the report for the market is that it simply paints the need for additional stimulus; hence, this bad news gets interpreted as good news.
Import prices rose 0.9% in December while the November increase was revised up to 0.2% from 0.1%. Excluding oil, import prices rose 0.4% after decreasing a revised 0.2% (from -0.3%) in November. Export prices rose 1.1% in December while the November increase was revised up to 0.7% from 0.6%. Excluding agriculture, export prices rose 1.3% after increasing 0.3% in November.
December PPI (Briefing.com consensus 0.4%; prior 0.1%), Core PPI (Briefing.com consensus 0.1%; prior 0.1%), December Retail Sales (Briefing.com consensus -0.2%; prior -1.1%), Retail Sales ex-auto (Briefing.com consensus -0.2%; prior -0.9%), November Business Inventories (Briefing.com consensus 0.5%; prior 0.7%), and January Empire State Manufacturing (Briefing.com consensus 6.0; prior 4.9) will be reported tomorrow at 8:30 ET, followed by December Industrial Production (Briefing.com consensus 0.4%; prior 0.4%) and Capacity Utilization (Briefing.com consensus 73.5%; prior 73.3%) at 9:15 ET and the preliminary Michigan Consumer Sentiment Survey for January (Briefing.com consensus 80.0; prior 80.7) at 10:00 ET.
Russell 2000 +9.1% YTD
Nasdaq Composite +1.7% YTD
Dow Jones Industrial Average +1.3% YTD
S&P 500 +1.1% YTD
Dow 30991.46 -68.95 (-0.22%)
Nasdaq 13112.65 -16.31 (-0.12%)
SP 500 3795.54 -14.30 (-0.38%)
10-yr Note -7/32 1.129
NYSE Adv 2182 Dec 958 Vol 1.04 bln
Nasdaq Adv 2687 Dec 1073 Vol 6.60 bln
Strong: Energy, Industrials, Financials, Real Estate
Weak: Utilities, Consumer Staples, Technology, Consumer Discretionary, Communication Services
Moving the Market
Biden administration will reportedly seek $2 trln in fiscal spending
Initial claims reach highest level since late August