The S&P 500 Index ($SPX) (SPY) today is down -0.09%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.08%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.21%. March E-mini S&P futures (ESH25) are down -0.11%, and March E-mini Nasdaq futures (NQH25) are down -0.20%.
Stocks today are mixed. The overall market garnered support today from a report from Bloomberg that said President-elect Trump’s economic team is considering a gradual ramp-up in trade tariffs in a strategy to avert a spike in inflation. Stocks also found support after US Dec producer prices rose less than expected, reducing inflation concerns and lowering T-note yields.
However, stock indexes fell back from their best levels and turned mixed on some negative corporate news. Eli Lilly tumbled more than -7% after reporting Q4 preliminary revenue below consensus. Also, Meta Platforms fell more than -2% after it said it plans to cut 5% of its staff through performance-based eliminations.
Bloomberg reported that President-elect Trump’s incoming economic team is considering graduated tariff hikes of about 2% to 5% a month rather than aggressive one-time increases to avert inflation spikes.
US Dec PPI final demand rose +0.2% m/m and +3.3% y/y, weaker than expectations of +0.4% m/m and +3.5% y/y. Also, Dec PPI ex-food and energy was unchanged m/m and rose +3.5% y/y, weaker than expectations of +0.3% m/m and +3.8% y/y.
The markets are looking toward Wednesday’s US consumer price report to see if sticky price pressures will keep the Fed from cutting interest rates. Dec CPI is expected to accelerate to +2.9% y/y from +2.7% y/y in Nov, and Dec core CPI to remain unchanged from Nov at +3.3% y/y. Also, Thursday’s US retail sales report will garner attention to see if consumer spending is holding up (Dec retail sales expected +0.6% m/m).
Earnings season begins this week as banks begin reporting Q4 earnings. Citigroup, JPMorgan Chase, Goldman Sachs, and Wells Fargo will report earnings results on Wednesday. According to Bloomberg Intelligence, analysts estimate S&P 500 earnings to grow 7.5% in Q4, the second-highest pre-season forecast in the past three years.
The markets are discounting the chances at 3% for a -25 bp rate cut at the January 28-29 FOMC meeting.
Overseas stock markets today are mixed. The Euro Stoxx 50 is up +0.63%. China’s Shanghai Composite Index closed up +2.54%. Japan’s Nikkei Stock 225 fell to a 6-week low and closed down -1.83%.
Interest Rates
March 10-year T-notes (ZNH25) today are up +2 ticks. The 10-year T-note yield is down -0.4 bp to 4.786%. Mar T-notes today are modestly higher on a Bloomberg report that said President-elect Trump’s incoming economic team is considering gradual tariff hikes to avert a spike in inflation. T-notes also found support on today’s weaker-than-expected US Dec producer price report.
Limiting gains in T-notes is some negative carryover from weakness in European government bonds. Also, rising inflation expectations are bearish for T-notes as the 10-year breakeven inflation rate rose to a 14-1/2 month high today at 2.476%. In addition, supply pressures weigh on T-notes with expected pricing of $40 billion to $45 billion of corporate debt securities this week, which prompts bond dealers to short 10-year T-note futures as a hedge against the incoming supply.
European government bond yields today are moving higher. The 10-year German bund yield rose to a 7-month high of 2.648% and is up +2.9 bp to 2.642%. The 10-year UK gilt yield is up +0.2 bp to 4.886%.
ECB Governing Council member Holzmann said it’s unclear if the ECB will lower interest rates again at its January 30 policy meeting, citing “hiccups” in Eurozone inflation.
Swaps are discounting the chances at 97% for a -25 bp rate cut by the ECB at its January 30 policy meeting.
US Stock Movers
Homebuilders are climbing today, with KB Home (KBH) up more than +5% after reporting Q4 EPS of $2.52, stronger than the consensus of $2.44. Also, DR Horton (DHI) is up more than +3%, and PulteGroup (PHM), Toll Brothers (TOL), and Lennar (LEN) are up more than +2%.
Celanese Corp (CE) is up more than +5% to lead gainers in the S&P 500 after Bank of America Global Research double-upgraded the stock to buy from underperform with a price target of $88.
H&E Equipment Services (HEES) is up more than +105% after United Rentals agreed to buy the company for $3.4 billion in cash.
United Rentals (URI) is up more than +4% after acquiring H&E Equipment Services, the 6th biggest company in the US rental sector, which will immediately increase United Rental’s market share.
Medtronic Plc (MDT) is up more than 3% after the Centers for Medicare and Medicaid Services said it is opening a national coverage analysis on renal denervation, which could support Medicare beneficiary access to Medtronic’s Symplicity Spyral renal denervation system used in the Symplicity blood pressure procedure.
Westinghouse Air Brake Technologies (WAB) is up more than +2% after acquiring Evident’s Inspection Technologies division for $1.78 billion, expanding WAB’s total addressable market to $16 billion from about $8 billion.
Eastman Chemical (EMN) is up more than +2% after Bank of America Global Research upgraded the stock to buy from neutral with a price target of $109.
A O Smith (AOS) is up more than 1% after Oppenheimer & Co upgraded the stock to outperform from market perform with a price target of $88.
ELI Lilly (LLY) is down more than -7% to lead losers in the S&P 500 after reporting Q4 preliminary revenue of $13.5 billion, below the consensus of $14.0 billion.
Signet Jewelers (SIG) is down more than -24% after cutting its Q4 sales forecast to $2.32 billion-$2.34 billion from a previous estimate of $2.38 billion-$2.46 billion, well below the consensus of $2.41 billion.
Charles River Laboratories (CRL) is down more than -6% after it said it expects 2025 non-GAAP operating margin will be modestly below estimated 2024 level.
Perrigo Co. (PRGO) is down more than -4% after Argus Research downgraded the stock to hold from buy.
Meta Platforms (META) is down more than -2% after it said it plans to cut 5% of its staff through performance-based eliminations.
Regeneron Pharmaceuticals (REGN) is down more than -2% after Citigroup cut its price target on the stock to $795 from $895.
Archer-Daniels-Midland (ADM) is down more than -2% after Bank of America Global Research downgraded the stock to underperform from neutral.
Jack Henry & Associates (JKHY) is down more than -2% after Wells Fargo Securities initiated coverage of the stock with a recommendation of underweight and a price target of $155.
Earnings Reports (1/14/2025)
Applied Digital Corp (APLD), Calavo Growers Inc (CVGW), Gencor Industries Inc (GENC), Park Aerospace Corp (PKE), Renovaro Inc (RENB).
