Stock Market Update: Mixed Results Amid Economic Signals
The S&P 500 Index ($SPX) (SPY) closed on Monday with a gain of +0.55%, while the Dow Jones Industrials Index ($DOWI) (DIA) declined by -0.06%. The Nasdaq 100 Index ($IUXX) (QQQ) rose by +1.09%. Additionally, March E-mini S&P futures (ESH25) increased by +0.61%, and March E-mini Nasdaq futures (NQH25) were up +1.22%.
Stock Performance Driven by Tech Gains
On Monday, stocks showed mixed results, with the S&P 500 and Nasdaq 100 reaching one-week highs, thanks in part to the performance of semiconductor companies. Nvidia saw its shares rise more than +3% after Hon Hai Precision Industry Co., its partner in Taiwan, reported better-than-expected revenue growth. Moreover, Microsoft’s stock climbed nearly +1% after the company disclosed plans to spend $80 billion on data centers and increase its capital expenditures for 2025.
Potential Tariff Plans Bring Mixed Signals
Support for stocks also emerged from a Washington Post article suggesting that aides to President-elect Trump are considering tariff plans that would focus on essential imports. If adopted, these plans could limit disruptions in global trade and lessen the inflationary effects typically associated with tariffs.
Fed Comments Cloud the Market Outlook
However, stocks faced downward pressure due to assertive comments from Federal Reserve officials. San Francisco Fed President Daly noted that while there has been significant progress in reducing price pressures, inflation is still “uncomfortably above our target.” Furthermore, Fed Governor Kugler emphasized that the US inflation rate is still not at the 2% target, indicating that more work remains to be done. Fed Governor Cook added that inflation has been more persistent than previously anticipated, resulting in a cautious stance regarding interest rate cuts.
Economic Data Presents a Mixed Picture
Mixed economic data contributed to the market’s unease. The December S&P services PMI was downgraded to 56.8 from 58.5, while factory orders for November fell by -0.4% month-over-month, slightly worse than expectations. In a more positive note, October factory orders were revised upwards to +0.5% month-over-month, up from the originally reported +0.2%.
Upcoming Economic Reports to Watch
Investors are focused on forthcoming economic reports to assess the US economy’s strength. On Tuesday, the December ISM services index is expected to rise by +1.4 to 53.5. The minutes from the December 17-18 FOMC meeting will be released on Wednesday, providing insights into the Fed’s future interest rate actions. Finally, Friday’s monthly US payroll report will evaluate labor market strength, with December nonfarm payrolls estimated at +160,000 and the unemployment rate expected to hold at 4.2%.
Market Sentiment on Interest Rate Cuts
The markets currently assign a 9% probability to a -25 basis point interest rate cut at the upcoming FOMC meeting scheduled for January 28-29.
Globally Mixed Market Trends
Globally, stock markets had mixed results on Monday. The Euro Stoxx 50 reached a three-week high with a rise of +2.36%, while China’s Shanghai Composite Index fell to a two-and-a-half month low, down -0.14%. Japan’s Nikkei Stock 225 dropped by -1.47%.
Interest Rates and Bond Market Trends
The March 10-year T-notes (ZNH25) finished down -3.5 ticks on Monday, with the 10-year T-note yield increasing by +1.4 basis points to 4.612%. The yield had climbed to an eight-month high of 4.642% earlier in the day. Bond prices faced pressure due to weak performance in German bunds after the 10-year German bund yield increased, driven by a stronger-than-expected inflation report. This week, the Treasury plans to auction $119 billion in T-notes and T-bonds, adding to supply pressures.
T-notes found some support following the report on potential tariff plans from Trump’s aides, which may help alleviate concerns about inflation. Additionally, decent demand emerged in the Treasury’s $58 billion auction of 3-year T-notes, which saw a bid-to-cover ratio of 2.62.
European Bond Markets Trend Upward
European government bond yields rose, with the 10-year German bund yield reaching a two-month high of 2.469%, finishing up +2.1 basis points at 2.447%. The 10-year UK gilt yield increased by +1.8 basis points to 4.610%.
Consumer Sentiment in the Eurozone
The Eurozone’s January Sentix investor confidence index dropped by -0.2, hitting a 14-month low of -17.7, though it was slightly stronger than the anticipated -17.9.
The revised Eurozone December S&P composite PMI improved by +0.1 to 49.6 from the previously reported 49.5. In Germany, the December CPI rose by +0.7% month-over-month and +2.9% year-over-year, outpacing expectations of +0.5% month-over-month and +2.6% year-over-year gains, marking the highest annual increase in 11 months.
Market projections show a 98% chance of a -25 basis point rate cut by the ECB during its meeting on January 30.
Technology Stocks See Notable Movements
Chip makers surged on Monday, as Nvidia’s assembly partner, Hon Hai Precision Industry Co (Foxconn), reported strong revenue growth fueled by demand for AI infrastructure. Micron Technology (MU) led the gains in the S&P 500, closing up more than +10%. ASML Holding NV (ASML) rose over +7%, and KLA Corp (KLAC) jumped more than +5%. Nvidia (NVDA) also performed well, increasing over +3%, while Advanced Micro Devices (AMD) and NXP Semiconductors NV (NXPI) gained more than +2%.
MicroStrategy and Other Movers for the Day
MicroStrategy (MSTR) rose over +11% as Bitcoin prices climbed more than +4%, reaching a two-week high after the company disclosed it acquired 1,070 Bitcoin recently.
Teradyne (TER) saw a more than +7% increase following an upgrade from Northland Securities, while US Steel (X) also gained more than +7% after filing lawsuits to secure its merger with Nippon Steel, which had been blocked.
Vertiv Holdings (VRT) advanced over +6% after Morgan Stanley recommended the stock as overweight with a price target of $150.
Stellantis NV (STLA) climbed more than +3%, benefiting from positive news regarding potential tariff reconsiderations. American Airlines Group (AAL) increased by over +2% due to upgrades from multiple analysts.
Declines in Certain Stocks
On the other hand, some companies faced declines. Uber Technologies (UBER) rose over +2% after revealing its plan to repurchase $1.5 billion of its shares. In contrast, Palantir Technologies (PLTR) dropped more than -4% after receiving an underweight recommendation from Morgan Stanley. Similarly, Essex Property Trust (ESS) fared poorly, decreasing by more than -4% following a price target reduction from Mizuho Securities. T-Mobile US (TMUS) and Paychex (PAYX) also suffered losses.
Upcoming Earnings Reports
Earnings Reports (1/7/2025)
AAR Corp (AIR), Apogee Enterprises Inc (APOG), AZZ Inc (AZZ), Cal-Maine Foods Inc (CALM), Kura Sushi USA Inc (KRUS), Lindsay Corp (LNN), PACS Group Inc (PACS), Richardson Electronics Ltd/Uni (RELL), RPM International Inc (RPM), Simulations Plus Inc (SLP).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
