Markets React to Economic Insights and Political Developments
Stock Indexes and Futures Move Upward
The S&P 500 Index ($SPX) (SPY) today is up +0.51%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.27%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.80%. March E-mini S&P futures (ESH25) are up +0.64%, and March E-mini Nasdaq futures (NQH25) have increased by +0.92%.
Short Covering and Tech Strength Boost Markets
Today’s stock market is experiencing moderate gains, supported by short covering and buoyed by positive performance in major technology stocks. This comes ahead of the latest report on US manufacturing activity, specifically the December ISM manufacturing index.
Political Remarks Influence Market Sentiment
Additively, President-elect Trump mentioned that Louisiana Republican Mike Johnson is “very close” to achieving nearly full support in today’s Speaker of the House vote. If Johnson is elected as Speaker, it may facilitate the passage of President-elect Trump’s legislation, which is generally considered favorable for markets.
China’s Economic Concerns Affect Global Outlook
Meanwhile, worries regarding China’s economic growth persist, negatively impacting Chinese equities and contributing to global growth concerns. The Shanghai Composite Stock Index dropped over -1% to its lowest in a month, while the yuan decreased to a 14-month low against the dollar.
Thin Trading Conditions Lead to Volatility
Trading volumes are low this holiday week, making stock movements more susceptible to exaggeration. Investors are especially keen on the US December ISM manufacturing index, with expectations predicting a slight drop of -0.2 to 48.2.
Interest Rate Speculations
The market is pricing in an 11% chance for a -25 basis point rate cut at the upcoming FOMC meeting on January 28-29.
Overseas Markets Follow Suit
International stock markets are also seeing declines today. The Euro Stoxx 50 is down -0.63%. In China, the Shanghai Composite Index fell -1.57%. Japan’s Nikkei Stock 225 was closed due to a bank holiday.
Interest Rates and Bond Market Activity
March 10-year T-notes (ZNH25) are up +2 ticks today, with the 10-year T-note yield falling -0.4 basis points to 4.555%. Modest gains in T-notes come from mild short covering ahead of the manufacturing index report, although supply pressures from a $119 billion Treasury auction next week may limit these gains.
European Bond Yields Mixed
European government bond yields are varied, with the 10-year German bund yield rising by +1.2 basis points to 2.391%, while the 10-year UK gilt yield decreased by -3.0 basis points to 4.565%.
Labor Market Shows Resilience in Germany
In Germany, the December unemployment rate held steady at 6.1%, better than expected. This reflects a stronger labor market than the anticipated increase to 6.2%.
Rate Cut Predictions from ECB
Swaps indicate a 100% likelihood of a -25 basis point rate cut by the European Central Bank at its meeting on January 30, and a 9% chance of a -50 basis point cut at the same meeting.
Tech Stocks Lift US Market
The broader market is buoyed by the robust performance of megacap technology stocks. Nvidia (NVDA) leads the Dow Jones Industrials with gains exceeding +3%. Other notable gainers include Amazon.com (AMZN), Alphabet (GOOGL), Meta Platforms (META), and Tesla (TSLA), each rising by over +1%.
Stock Movers and Analyst Upgrades
Block (SQ) has increased by over +3% following an upgrade from Raymond James. Chewy (CHWY) gained more than +2% after Wolfe Research lifted its rating. PulteGroup (PHM) and Carlyle Group (CG) saw similar upward trends due to favorable analyst actions.
Decliners and Market Challenges
On the downside, US Steel (X) fell by more than -5% amid reports of President Biden blocking its sale to Nippon Steel. Brown-Forman Corp (BF/B) dropped over -3% following health warnings regarding cancer links to alcohol labels. Furthermore, Stellantis NV (STLA) declined more than -2% as new rules disqualify certain electric vehicle models from tax credits.
Carvana Faces Scrutiny
Carvana (CVNA) fell by more than -6% after Hindenburg Research expressed concerns over the company’s subprime loan portfolio. Adobe (ADBE) also saw a decline of more than -2% following a negative price target adjustment by UBS.
Future Outlook
As we progress through the week, all eyes will remain on economic indicators and corporate performance, which are crucial for guiding future market movements.
Earnings Reports (1/3/2025)
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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.
