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Nasdaq and S&P’s Steady Climb Amid Dow’s Struggles Nasdaq and S&P’s Steady Climb Amid Dow’s Struggles

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Friday’s trading session saw the Nasdaq and S&P 500 inching into positive territory after facing pressure for most part of the day. The release of wholesale inflation data bolstered investor sentiment, while the Dow grappled with a modest loss, primarily due to a decline in UnitedHealth (UNH).

An unexpected downtick in producer price inflation provided a glimmer of hope, despite being overshadowed by a surge in oil prices and a drop in shares of airline companies and health insurers. Bank stocks also took center stage amid a rush of earnings from the sector.

The Nasdaq Composite (COMP.IND) nudged up slightly to close at 14,972.76, while the S&P 500 (SP500) inched up by just under 0.1% to finish at 4,783.83. The Dow (DJI) slipped 0.3% to close at 37,592.98.

β€œThe major equity indices are trending sideways at the highs. Typically, this indicates some form of institutional distribution. To our wizened old eyes, the Russell 2000 (RTY) is midway through a short-term correction, the Dow (DJI) is thinking about following suit and we believe the S&P 500 (SP500) may do so too,” remarked Alex King, investing group leader of Cestrian Capital Research, to Seeking Alpha.

β€œWe remain bullish for 2024 – it’s an election year after all – but for now in our staff personal account index ETF positions we are either fully hedged (S&P 500, Nasdaq) or net short (Russell 2000, Dow) – in case of further short-term weakness,” King added.

Delta Air Lines (DAL) incurred substantial selling pressure after issuing profit guidance below its long-term target, subsequently causing ripples for competitors like United Airlines (UAL) and American Airlines (AAL).

The Dow’s underperformance was exacerbated by UnitedHealth (UNH) retreating more than 3% following its quarterly report. The managed care giant’s higher medical costs outweighed its quarterly top- and bottom-line beat, impacting peers such as Humana (HUM) and CVS Health (CVS) as well.

Additionally, Boeing (BA) extended its weekly decline as repercussions from an accident involving a blown door plug on a 737 Max 9 aircraft last Friday continued to unfold, further weighing on the Dow (DJI).

Financials drew significant attention during the day, driven by earnings from industry bellwethers JPMorgan (JPM), Citigroup (C), Bank of America (BAC), and Wells Fargo (WFC).

Energy gained ground as WTI crude oil futures (CL1:COM) surged approximately 3% amid tensions in the Red Sea after U.S. and British airstrikes in Houthi-controlled areas of Yemen. Although oil moderated its gains later in the day, it still rose more than 1% on the session.

Before the opening bell, the U.S. Bureau of Labor Statistics reported that the producer price index (PPI) for December 2023 edged lower by 0.1% M/M, compared to a consensus for an increase of 0.1%. Core PPI, which excludes food and energy, remained unchanged, versus an anticipated rise of 0.2%.

The inflation data contrasted Thursday’s hotter-than-expected consumer inflation report, emphasizing the rocky road to the Federal Reserve’s 2% target.

The shorter-end more rate-sensitive 2-year yield (US2Y) witnessed a significant reaction to the PPI data, dropping almost 11 basis points to 4.15%. Longer-end maturities had a more muted response, with the 30-year yield (US30Y) unchanged at 4.18% and the 10-year yield (US10Y) down 3 basis points to under 3.95%. Notably, the yield curve between the US2Y and the US30Y un-inverted on Friday morning.

Check out live data on how Treasury yields are faring across the curve at the Seeking Alpha bond page.

β€œAfter the CPI yesterday and PPI today, I’m pretty confident that the core PCE deflator rose at a 2.0% annualized rate in Q4. Job done. Cuts rates now please,” said Pantheon Macro’s Ian Shepherdson.

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