Stocks Battle Back from Lows
Able to move well off solid lows on the day, U.S. equities finished mixed amid a super-fecta of persistent U.S. political uncertainty, a slew of disappointing earnings reports, a sub-par domestic economic calendar, and caution ahead of tomorrow’s Fed monetary policy decision.
Treasury yields and the U.S. dollar were lower, while gold jumped and crude oil prices inched higher.
The Dow Jones Industrial Average declined 107 points (0.5%) to 19,864
The S&P 500 Index fell 2 points (0.1%) to 2,281
The Nasdaq Composite inched 1 point higher to 5,615
In heavy volume, 1.1 billion shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq
WTI crude oil ticked $0.18 higher to $52.81 per barrel and wholesale gasoline added $0.02 to $1.55 per gallon
The Bloomberg gold spot price rallied $16.47 to $1,212.17 per ounce
The Dollar Index—a comparison of the U.S. dollar to six major world currencies—fell 0.8% to 99.60
Consumer Confidence dips from multi-year high, Chicago manufacturing output falls
The Consumer Confidence Index dipped from the highest level since 2001 to 111.8 in January from the downwardly revised 113.3 level in December, and compared to the Bloomberg estimate of 112.8. Sentiment toward the present situation improved solidly but expectations of business conditions for the next six months fell. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—rose to 5.9 from the 3.3 posted in December.
The Chicago Purchasing Managers Index held onto a level slightly depicting expansion (above 50), after surprisingly falling to 50.3 in January from 54.6 in December, and versus expectations of a gain to 55.0. Growth in new orders fell to contraction territory and growth in production slowed, while contractions in inventories and employment both accelerated.
The 20-city composite S&P CoreLogic Case-Shiller Home Price Index showed a 5.3% gain in home prices y/y in November, versus expectations of a 5.0% increase. Month/month (m/m), home prices were up 0.9% on a seasonally adjusted basis for November, topping forecasts calling for a 0.7% gain.
The 4Q Employment Cost Index increased by 0.5% quarter-over-quarter, below forecasts of a 0.6% rise, which was the gain seen in Q3.
Treasuries were higher, as the yield on the 2-year note ticked 1 basis point lower to 1.21%, the yield on the 10-year note fell 4 bps to 2.45%, and the 30-year bond rate declined 3 bps to 3.05%. Treasury yields and the U.S. dollar continue to be choppy as of late, with the global markets grappling with the economic data ahead of tomorrow’s Fed monetary policy decision and the latest policy moves from President Donald Trump, notably on trade and immigration. The Federal Open Market Committee (FOMC) is expected to keep its policy stance unchanged after December’s rate increase, and will not deliver updated economic projections and a press conference from Fed Chairwoman Janet Yellen. However, the accompanying statement is likely to garner scrutiny for insight to the timing of future rate hikes this year and if President Donald Trump’s actions are having an impact on their economic outlook and forecasts for future policy moves.
Ahead of the FOMC’s decision, we will get national reads on manufacturing activity for January from ISM and Markit, with the former’s report projected to show expansion for the fifth-straight month. Other reports due out tomorrow include: ADP’s employment change report, MBA mortgage applications, construction spending and monthly auto sales.
Europe adds to yesterday’s drop, Asia falls as U.S. political fallout persists
European equities gave up modest early gains and extended yesterday’s drop that came courtesy of global market uneasiness stemming from U.S. President Donald Trump’s actions to temporarily ban entry into the U.S. for refugees from seven predominantly Muslim countries. However, earnings reports in the region were mostly positive, but oil & gas and basic materials issues saw some pressure despite higher crude oil prices and an economic front that was relatively favorable.
Preliminary Eurozone Q4 GDP accelerating to a 0.5% q/q pace of growth, from the 0.4% expansion in Q3, while output rose 1.8% y/y, topping forecasts of a 1.7% gain. The Eurozone consumer price inflation estimate for January came in well above forecasts and the unemployment rate declined to a level below expectations for December. However, German retail sales unexpectedly fell last month. The euro and British pound rose versus the U.S. dollar. Financials moved lower amid festering banking sector concerns and pressure on global bond yields.
Stocks in Asia finished lower as the global markets remain jittery in the wake of U.S. President Donald Trump’s recent moves to crackdown on immigration. The yen extended gains to weigh on Japanese equities, while the Bank of Japan kept its monetary policy stance unchanged and a separate report showed the nation’s household spending declined by a smaller amount than expected in December. Stocks in Australia and India decreased, while those traded in South Korea also traded lower in its return to action following yesterday’s holiday. Markets in China and Hong Kong remained closed for the Lunar New Year holiday.