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Rebellious spirt undercuts risk sentiment in weak session
29-Jan-21 16:15 ET
Dow -620.74 at 29982.62, Nasdaq -266.46 at 13070.70, S&P -73.14 at 3714.24

https://www.briefing.com/stock-market-update

[BRIEFING.COM] The S&P 500 fell 1.9% on Friday, as the continuation of the short-squeeze mania wore out investors and fed into concerns about fund managers selling long positions to cover their shorts. The Nasdaq Composite declined 2.0%, the Dow Jones Industrial Average declined 2.0%, and the Russell 2000 declined 1.6%.

Brokerage firms, most notably Robinhood, eased some of the trading restrictions they temporarily placed yesterday on heavily-shorted stocks like GameStop (GME 325.00, +131.40, +67.9%) and AMC Entertainment (AMC 13.26, +4.63, +53.7%). There were still limitations, though, which might have tempered the intraday rebound gains in these stocks.

It was evident that the so-called rebellious spirt among retail traders was still burning strong today. Considering these emotions, the volatility, and recent commentary about the market being vulnerable for a correction, there was an accompanying suspicion if the short-squeeze mania was the catalyst for a potentially extended pullback.

From a technical perspective, the S&P 500 closed marginally below its 50-day moving average (3716), which is a key technical level many traders watch for short-term purposes. All 11 S&P 500 sectors finished lower with losses ranging from 0.5% (utilities) to 3.4% (energy).

Separately, better-than-expected earnings reports and encouraging vaccine news failed to inspire enthusiasm in the broad market.

Dow components Visa (V 193.25, -4.97, -2.5%), Honeywell (HON 195.37, -7.47, -3.7%), Caterpillar (CAT 182.84, -1.50, -0.8%), and Chevron (CVX 85.20, -3.82, -4.3%) closed lower following their earnings reports.

Johnson & Johnson (JNJ 163.13, -6.03, -3.6%) said its single-dose vaccine candidate was 66% effective in protecting against COVID-19, and Novavax (NVAX 220.94, +86.93, +64.9%) said its vaccine candidate produced an 89.3% efficacy rate in its Phase 3 trial in the UK. NVAX shares rose 65%.

Interestingly, longer-dated Treasuries traded lower despite the weakness in equities, which was symptomatic of cash-raising efforts. The 2-yr yield decreased one basis point to 0.11%, while the 10-yr yield increased four basis points to 1.09%. The U.S. Dollar Index increased 0.1% to 90.55. WTI crude futures decreased 0.2%, or $0.12, to $52.18/bbl.

Reviewing Friday's economic data:

Personal income increased 0.6% m/m in December (Briefing.com consensus 0.1%) and personal spending declined 0.2% (Briefing.com consensus -0.5%). The PCE Price Index was up 0.4% m/m (Briefing.com consensus 0.3%) and the core PCE Price Index was up 0.3% (Briefing.com consensus 0.1%), leaving the yr/yr rates at 1.3% and 1.5%, respectively.
The key takeaway from the report is that it wasn't as bad as feared, which qualifies as good news for a market that has seen a number of economic reports of late not live up to expectations.
The Q4 Employment Cost Index increased 0.7% (Briefing.com consensus 0.5%), seasonally adjusted, for the three-month period ending in December 2020 after increasing 0.5% for the three-month period ending September 2020. Wages and salaries, which account for about 70% of compensation costs, rose 0.9%, while benefit costs, which make up the remainder of compensation costs, increased 0.6%.
The key takeaway from the report is that compensation costs for civilian workers, private industry workers, and state and local government workers all moderated from the same period a year ago.
The final January reading for the University of Michigan Index of Consumer Sentiment checked in at 79.0 (Briefing.com consensus 79.2) versus the preliminary reading of 79.2 and the final reading of 80.7 for December.
The key takeaway from the report is that sentiment held relatively steady in January despite rising coronavirus cases/deaths, the insurrection, the impeachment of President Trump, and a deterioration in the labor market.
Pending home sales decreased 0.3% m/m in December (Briefing.com consensus -0.5%) following a revised 2.5% decline in November (from -2.6%).
The Chicago PMI for January increased to 63.8 (Briefing.com consensus 58.0) from a downwardly revised 58.7 in December (from 59.5).

Looking ahead, investors will receive the ISM Manufacturing Index for January and Construction Spending for December on Monday.

Russell 2000 +5.0% YTD
Nasdaq Composite +1.4% YTD
S&P 500 -1.1% YTD
Dow Jones Industrial Average -2.0% YTD

Market Snapshot
Dow 29982.62 -620.74 (-2.03%)
Nasdaq 13070.70 -266.46 (-2.00%)
SP 500 3714.24 -73.14 (-1.93%)
10-yr Note -3/32 1.079
NYSE Adv 865 Dec 2175 Vol 1.6 bln
Nasdaq Adv 1163 Dec 2575 Vol 7.7 bln

Industry Watch
Strong: Utilities
Weak: Energy, Financials, Consumer Discretionary, Industrials, Information Technology

Moving the Market

-- Weak session to end the week

-- Brokerage firms eased some trading restrictions on heavily-shorted stocks, sending these stocks higher

-- Johnson & Johnson (JNJ) and Novavax (NVAX) provided encouraging vaccine updates

-- Negative earnings reactions

Crude futures settle lower, equities pare losses
29-Jan-21 15:30 ET
Dow -455.74 at 30147.62, Nasdaq -202.84 at 13134.32, S&P -54.90 at 3732.48

[BRIEFING.COM] The S&P 500 continue to pare losses and is now down 1.3%. The Russell 2000 is down 1.4%.

One last look at the S&P 500 sectors shows every sector still trading lower, but the utilities sector (-0.1%) briefly emerged into positive territory earlier amid strength in Duke Energy (DUK 94.04, +2.26, +2.8%). The energy sector remains the weakest link with a 2.8% decline.

WTI crude futures settled lower by 0.2%, or $0.12, to $52.18/bbl.