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Market Snapshot

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

Dow 35927.56 +383.38 (1.08%)
Nasdaq 15565.57 +327.94 (2.15%)
SP 500 4709.84 +75.75 (1.63%)
10-yr Note -1/32 1.457
NYSE Adv 2135 Dec 1141 Vol 1.1 bln
Nasdaq Adv 2725 Dec 1601 Vol 5.2 bln

Industry Watch
Strong: Health Care, Information Technology, Utilities, Real Estate
Weak: Materials, Consumer Discretionary, Energy

Moving the Market

-- Positive reaction to the FOMC statement and economic/rate projections

-- Fed funds rate left near zero and most Fed members see at least three rate hikes in 2022

-- Fed Chair Powell talks positively on the labor market and the consumer

-- Retail sales for November miss expectations

Stocks rally after Fed does the expected
15-Dec-21 16:20 ET
Dow +383.38 at 35927.56, Nasdaq +327.94 at 15565.57, S&P +75.75 at 4709.84

[BRIEFING.COM] The S&P 500 rallied 1.6% on Wednesday, ending a two-day skid as the market reacted positively to the Fed's policy decision and Fed Chair Powell's press conference. The Dow Jones Industrial Average (+1.1%), Nasdaq Composite (+2.2%), and Russell 2000 (+1.7%) also closed sharply higher.

As anticipated, the Fed left the target range for the fed funds rate unchanged at 0.00-0.25%, said it will double the reduction of asset purchases to $30 billion per month ($20 billion for Treasuries and $10 billion for agency MBS), and signaled three rate hikes in 2022 amid expectations for continued inflation pressures.

The market was pleased to hear Fed Chair Powell talk positively on the labor market and the consumer, even as the Omicron variant poses a risk to the economy. He argued the Fed will tighten policy in a gradual, yet accommodative, way because of robust economic activity that is driving inflation higher. That was an optimistic point of view for the market.

Investors swiftly bought the dip in the mega-caps, which were dragging the S&P 500 lower by 0.3% prior to the Fed announcement. The heavily-weighted S&P 500 information technology sector went from a 0.7% intraday decline to a sector-leading 2.8% gain by the close.

The health care (+2.1%), utilities (+1.7%), real estate (+1.5%), and consumer staples (+1.2%) sectors were strong all session. The energy sector (-0.4%), on the other hand, was the only sector that closed lower despite higher oil prices ($70.89, +0.32, +0.5%).

Strikingly, the fed-funds-sensitive 2-yr yield settled higher by just one basis point to 0.67% after hitting 0.72% in the wake of the FOMC statement. With three rate hikes forecasted for next year, the 2-yr yield might have already priced in the Fed's near-term path. The 10-yr yield rose three basis points to 1.46%. The U.S. Dollar Index lost 0.2% to 96.37.

Short-covering activity might have contributed to today's price action. The CBOE Volatility Index was up 7.2% intraday amid increased hedging interest but ended the session lower by 11.9% to 19.29.

In corporate news, Eli Lilly (LLY 275.12, +25.90, +10.4%) climbed 10% after the company provided upbeat FY21 and FY22 EPS guidance. Lowe's (LOW 257.56, +5.10, +2.0%) overcame a negative start attributed to relatively disappointing guidance. Nucor (NUE 108.22, -10.20, -8.6%) wasn't as lucky, with shares losing 8.6% following its downbeat guidance.

Reviewing Wednesday's economic data:

Total retail sales were up 0.3% month-over-month (Briefing.com consensus +0.8%) as were retail sales, excluding autos (Briefing.com consensus +0.9%). On a year-over-year basis, total retail sales were up 18.2% and up 19.5% excluding autos.
The key takeaway from the report is that it likely reflects the push to make holiday purchases early given all the reports about supply chain bottlenecks, meaning it might not be as disappointing as it appears at first blush. Tellingly, nonstore retailer sales were flat after increasing 4.1% in October and electronics and appliance store sales were down 4.6% after increasing 3.1% in October.
Import prices increased 0.7% in November after increasing 1.5% in October. Excluding oil, import prices increased 0.5% after increasing 0.5% in October. Export prices increased 1.0% after increasing 1.6% in October. Excluding agriculture, export prices increased 1.0% after increasing 1.7% in October.
The Empire State Manufacturing Survey increased to 31.9 in December (Briefing.com consensus 25.0) from 30.9 in November.
The NAHB Housing Market Index increased to 84.0 in December (Briefing.com consensus 84.0) from 83.0 in November.
Business inventories increased 1.2% m/m in October (Briefing.com consensus 1.0%) following a revised 0.8% increase (from 0.7%) in September.
The weekly MBA Mortgage Applications Index decreased 4.0% following a 2.0% increase in the prior week.

Looking ahead to Thursday, investors will receive weekly Initial and Continuing Claims, Housing Starts and Building Permits for November, Industrial Production and Capacity Utilization for November, the Philadelphia Fed Index for December, and the preliminary IHS Markit Manufacturing and Services PMIs for December.

S&P 500 +25.4% YTD
Nasdaq Composite +20.8% YTD
Dow Jones Industrial Average +17.4% YTD
Russell 2000 +11.2% YTD

Crude futures settle higher
15-Dec-21 15:30 ET
Dow +371.81 at 35915.99, Nasdaq +274.19 at 15511.82, S&P +66.21 at 4700.30

[BRIEFING.COM] The S&P 500 is trading at session highs with a 1.3% gain, as Fed Chair Powell talks positively on the labor market and the consumer. He also also argued that he doesn't think the Fed isn't "behind the curve" on inflation.

One last look at the sectors shows ten sectors trading higher and one -- energy (-0.1%) -- trading lower. The information technology sector (+2.1%) has claimed the top spot after being down 0.7% earlier today.

WTI crude futures settled higher 0.5%, or $0.32, to $70.89/bbl.