After barely holding up so far this week, market sentiment seems to have taken a downturn in the final trading session. Negative reactions to earnings reports, particularly from various tech stocks, have the potential to exert pressure on the market. Of greater significance is the impending release of crucial inflation data, likely to influence the Federal Reserve’s rate decision scheduled for Wednesday.

The futures market has priced in a 97.4% probability of steady rates at the upcoming meeting, the CME FedWatch Tool showed. However, bond market activity suggests traders are beginning to factor in the possibility of rate cuts throughout the year.

Cues From Thursday’s Trading:

Thursday witnessed a positive start in U.S. stocks, propelled by a government report revealing stronger-than-expected growth in the U.S. economy for the fourth quarter. Concurrently, jobless claims exceeded expectations, and durable goods orders stagnated, missing projections. Core order growth slightly surpassed expectations. Another report indicated higher-than-expected new home sales in December.

As traders digested this data and responded to varied earnings results, the major indices maintained a solid position in the morning session. However, by mid-session, the S&P 500 Index hovered just below the unchanged line, while the Dow Industrials and Nasdaq Composite briefly dipped below. In the afternoon, the major indices reversed course, concluding the day in positive territory.

Thursday’s upward movement propelled the Dow Industrials into record territory, with the S&P 500 Index securing a record high for the fifth consecutive session. Advancements were observed in a majority of S&P 500 sectors, particularly IT services, energy, communication services, and utility stocks, while healthcare and consumer discretionary stocks experienced declines.

US Index Performance On Thursday

Index Performance (+/-) Value
Nasdaq Composite +0.18% 15,510.50
S&P 500 Index +0.53% 4,894.16
Dow Industrials +0.64% 38,049.13
Russell 2000 +0.71% 1,975.88

Analyst Color:

Despite the strong GDP data, inflation components of the report came in benign, fund manager Louis Navellier pointed out. “The PCE level shows that inflation appears well on the way to their 2% target,” he said, adding that the GDP price index, expected to fall from 3.3% to 2.3% came in at 1.5%.

“The bond market says the Fed will cut as the yield curve is down 5bps across the yield curve. Recession fears are fading fast,” Navellier said.

“While the earnings season remains mixed, the overall trend remains positive, we have the election year wind at our back, and the recovery continuing in China (Hang Seng +5.2% in the last week) bodes well for global growth.”

Futures Today

Futures Performance On Friday

Futures Performance (+/-)
Nasdaq 100 -0.29%
S&P 500 -0.02%
Dow -0.02%
R2K +0.48%

In premarket trading on Friday, the SPDR S&P 500 ETF Trust SPY edged down 0.06% to $487.76 and the Invesco QQQ ETF QQQ fell 0.32% to $424.98, according to Benzinga Pro data.

Upcoming Economic Data:

The Bureau of Economic Analysis will release its December personal income and spending report at 8:30 a.m. ET. Economists, on average, expect month-over-month growth of 0.3% and 0.5%, respectively, for personal income and spending. These two metrics grew by 0.4% and 0.2%, respectively, in November.

The annual rate of the core price consumption expenditure, the Fed’s preferred inflation gauge, is expected to come in at 3% in December, down from 3.2% in November.

The National Association of Realtors is due to release its pending home sales index for December, with the consensus estimate of a 2% month-over-month increase in the index. The index was unchanged in November.

See also: Futures Vs. Options

Stocks In Focus:

  • Intel Corp. INTC fell over 10% in premarket trading after the company announced disappointing guidance.
  • Among the other stocks that are moving on earnings are KLA Corp. KLAC (down over 6%), T-Mobile US, Inc. TMUS (down over 3.5%), payment processor Visa, Inc. V (down over 3%), and Western Digital Corp. WDC (down nearly 5%)
  • American Express Company AXP, Colgate-Palmolive Company CL, and Norfolk Southern Corporation NSC are due to announce their quarterly results ahead of the market opening.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures fell 0.71% to $76.78 in early European session on Friday, reversing from the 3%+ rally on Thursday.

The benchmark 10-year Treasury note fell 0.016 percentage points to 4.116% on Friday.

Among the global equity markets, Asian stocks ended mixed, with the Hong Kong market pulling back after recent strong gains, stoked by the Chinese central bank cutting the reserve requirement in a bid to boost liquidity and amid reports of stock market boosting measures from the government.

China’s Shanghai Composite, however, ended modestly higher, while the Shenzhen Component Index declined. The Indian and Australian markets were closed for public holidays.

The European markets rallied and by late-morning trading, the Euro Stoxx 50 Index was up about a percent.

In the currency market, the dollar was weaker against most major currencies, except the Japanese yen, reflecting hopes of rate cuts by the Federal Reserve.

Read Next: S&P 500 Eyes Sixth Green Session, Tesla Tumbles, Oil At 2-Month High: What’s Driving Markets Thursday?

Illustration was generated using artificial intelligence via MidJourney.

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