Stocks Climb as Economic News Brightens Market Outlook
The S&P 500 Index ($SPX) (SPY) today is up +1.06%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.91%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.56%. March E-mini S&P futures (ESH25) are up +1.05%, and March E-mini Nasdaq futures (NQH25) are up +1.59%.
Overview of Today’s Market Movements
Markets are performing well today, with the S&P 500 and Nasdaq 100 reaching their highest levels in one and a half weeks, while the Dow is at a one-month peak. Lower Treasury note yields are aiding stock prices, with the 10-year T-note yield decreasing to a two-week low of 4.566%. Additionally, a rise in chip stocks is contributing positively to market sentiment.
US Economic Data Surprises Investors
Today’s economic data exceeded expectations and fosters a sense of optimism. December’s housing starts surged +15.8% month-over-month to a 10-month high of 1.499 million, surpassing forecasts of 1.327 million. Meanwhile, December building permits fell by -0.7% to 1.483 million, also better than the predicted 1.460 million. December manufacturing production increased by +0.6% month-over-month, which is notable given expectations of +0.2% and marks the largest rise in four months.
Global Influences on the Market
Support for US stocks derives from the positive performance of European stocks, with the Euro Stoxx 50 reaching a 24-year high. The market received additional encouragement from potential easing of US-China relations following a conversation between Chinese President Xi Jinping and President-elect Trump, who characterized the call as beneficial for both nations.
China’s Economic Strength Lifts Global Confidence
World equity markets are buoyed by promising indicators from China. The country’s Q4 GDP rose by +5.4% year-over-year, beating the anticipated +5.0% and representing the fastest growth in six quarters. Moreover, December’s industrial production grew by +6.2% year-over-year, ahead of the expected +5.4% and the strongest growth in eight months.
IMF Updates Global Forecast
The International Monetary Fund (IMF) has raised its 2025 global GDP forecast to 3.3%, marking an increase from the previous 3.2% forecast made in October. This adjustment reflects stronger demand from the US economy.
Federal Reserve’s Stance Worries Investors
However, cautious words from Cleveland Fed President Hammack regarding inflation and interest rates could dampen enthusiasm. She emphasized that the Fed is still facing an inflation challenge and can afford to be “very patient” about further rate cuts.
Bitcoin Sees Notable Gains
The price of Bitcoin (^BTCUSD) has risen over +3% to reach a one-month high, bolstered by news that President-elect Trump intends to prioritize cryptocurrency through an executive order, which includes the establishment of a crypto advisory council.
Upcoming Earnings Season
The earnings season kicks off this week as companies begin reporting their Q4 results. Analysts from Bloomberg Intelligence anticipate S&P 500 earnings to grow by 7.5% in Q4, which would be the second-highest pre-season forecast in the last three years.
Market Outlook for Interest Rates
Market expectations currently project only a 1% chance of a -25 basis point rate cut at the FOMC meeting scheduled for January 28-29.
Mixed Overseas Markets
International markets are displaying mixed results today. The Euro Stoxx 50 is up +0.81%, while China’s Shanghai Composite Index has gained +0.18%. Conversely, Japan’s Nikkei Stock 225 has dipped -0.31% to a one-and-a-half month low.
Interest Rates Overview
March 10-year T-notes (ZNH25) are up +2 ticks today, while the yield on the 10-year T-note has decreased by -0.8 basis points to 4.605%. This reflects a rise to a two-week high, amidst supportive trends in European bonds. Concurrently, inflation expectations have lowered, contributing to a bullish stance on T-notes, as evidenced by the 10-year breakeven rate hitting a one-week low of 2.405%.
European Bond Market Activity
The yields on European government bonds are also declining, with Germany’s 10-year bund yield falling to a one-week low of 2.506%, down -3.3 basis points to 2.514%. The UK 10-year gilt yield fell to a one-and-a-half week low of 4.611%, decreasing by -4.8 basis points to 4.631%.
ECB Comments Impact Market Sentiment
ECB Governing Council member and Bundesbank President Nagel advised caution regarding monetary policy normalization, citing persistent inflation challenges, especially in the services sector.
Revised Eurozone GDP Projections
The IMF also adjusted its Eurozone 2025 GDP estimate down to 1.0% from a previous forecast of 1.2% made in October. Additionally, UK December retail sales excluding auto fuel unexpectedly dropped -0.6% month-over-month, contrary to expectations of a +0.3% increase.
US Stock Movers Today
Chip stocks have shown notable gains, with GlobalFoundries (GFS) increasing more than +5%. Other prominent gainers include Marvell Technology (MRVL) and Nvidia (NVDA), both up more than +3%, contributing to the Dow’s strength. Additional companies like Broadcom (AVGO) and Qualcomm (QCOM) have also risen over +2%.
Cryptocurrency-related stocks are climbing alongside Bitcoin’s gains, with Coinbase Global (COIN) and MicroStrategy (MSTR) rising more than +4%. Intel (INTC) stands out with a remarkable increase of over +7% following speculation it may be an acquisition target.
Qorvo (QRVO) surged more than +13% after Starboard Value acquired a 7.7% stake, pushing for stock improvements. Lumentum Holdings (LITE) also increased by over +5% after a major upgrade from Barclays.
Truist Financial Corp (TFC) reported a Q4 taxable equivalent net interest income of $3.64 billion, exceeding the consensus of $3.60 billion, leading to an increase of over +4% in its stock price.
In contrast, JB Hunt Transport Services (JBHT) fell over -6% after reporting a Q4 EPS of $1.53, below the expected $1.63. Similarly, Crowdstrike Holdings (CRWD) dropped more than -3% amidst concerns of insider selling.
Upcoming Earnings Reports (1/17/2025)
Companies scheduled to report earnings include Citizens Financial Group Inc (CFG), Fastenal Co (FAST), Huntington Bancshares Inc/OH (HBAN), Regions Financial Corp (RF), Schlumberger NV (SLB), State Street Corp (STT), and Truist Financial Corp (TFC).
On the date of publication, Rich Asplund did not have 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 those of the author and do not necessarily reflect those of Nasdaq, Inc.
