The S&P 500 Index ($SPX) (SPY) Thursday closed down -0.21%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.16%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.69%. March E-mini S&P futures (ESH25) are down -0.38%, and March E-mini Nasdaq futures (NQH25) are down -0.93%.
Stocks on Thursday posted moderate losses. The weakness in megacap technology stocks Thursday weighed on the broader market. Also, health insurance stocks retreated and was negative for the overall market after UnitedHealth Group sank more than -6% after reporting weaker-than-expected Q4 revenue.
Strength in chip makers Thursday was a positive factor for stocks after Taiwan Semiconductor Manufacturing Co, the main chipmaker to Apple and Nvidia, set its capital expenditure target well ahead of estimates and fueled hopes of resilient spending on artificial intelligence.
Stocks also garnered support Thursday as bond yields turned lower on dovish comments from Fed Governor Waller, who said if inflation moves lower, there may be more rate cuts than the market anticipates, with 3 or 4 rate cuts possible this year if the data cooperates.
Stocks also had carryover support from Wednesday when the US December consumer price report showed an unexpected easing of core inflation. The slowdown in consumer prices bolstered speculation that the Fed will still be able to cut interest rates this year.
Thursday's US economic news was mixed for stocks. Dec retail sales rose less than expected, and weekly jobless claims increased more than expected. However, the Philadelphia Fed business outlook survey jumped more than expected to a 3-3/4 year high, and the Jan NAHB housing market index unexpectedly rose to a 9-month high.
US weekly initial unemployment claims rose +14,000 to 217,000, showing a weaker labor market than expectations of 210,000.
US Dec retail sales rose +0.4% m/m, weaker than expectations of +0.6% m/m.
The US Jan Philadelphia Fed business outlook survey jumped 55.2 to a 3-3/4 year high of 44.3, stronger than expectations of -5.0.
The US Dec import price index ex-petroleum unexpectedly rose +0.2% m/m versus expectations of a -0.1% m/m decline.
The US Jan NAHB housing market index unexpectedly rose +1 to a 9-month high of 47, stronger than expectations of a decline to 45.
Earnings season begins this week as companies start reporting Q4 earnings results. 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 on Thursday settled higher. The Euro Stoxx 50 rallied to a 9-1/2 month high and closed up +1.4%. China's Shanghai Composite Index rose to a 1-1/2 week high and closed up +0.28%. Japan's Nikkei Stock 225 closed up +0.33%.
Interest Rates
March 10-year T-notes (ZNH25) Thursday closed up +9 ticks. The 10-year T-note yield fell -4.7 bp to 4.606%. Mar T-notes Thursday recovered from early losses and climbed to a 1-week high, and the 10-year T-note yield fell to a 1-week low of 4.586%. Short covering emerged in T-notes Thursday on dovish comments from Fed Governor Waller, who said if inflation moves lower, there may be more rate cuts than the market anticipates. T-notes also found support in Thursday's US economic news, which showed retail sales rose less than expected and weekly jobless claims climbed more than expected.
T-notes initially moved lower today on mixed US economic news after the Jan Philadelphia Fed business outlook survey rose more than expected to a 3-3/4 year high, and the Jan NAHB housing market index unexpectedly rose to a 9-month high.
European government bond yields Thursday moved lower. The 10-year German bund yield fell -1.3 bp to 2.547%. The 10-year UK gilt yield fell -5.1 bp to 4.679%.
The minutes of the ECB's December 11-12 meeting were slightly dovish as they noted that while the -25 bp rate cut decided at the meeting was widely supported, some members argued for a more aggressive 50 bps reduction.
ECB Governing Council member Centeno said, "If we look at the next months, quarters, year and a half, we see inflation clearly converging to values probably slightly below 2%, and interest rates in the Eurozone will continue on a trajectory ideally to values also close to 2%."
UK Nov manufacturing production fell -0.3% m/m, weaker than expectations of -0.2% m/m.
Swaps are discounting the chances at 98% for a -25 bp rate cut by the ECB at its January 30 policy meeting.
US Stock Movers
Weakness in megacap technology stocks was bearish for the overall market. Apple (AAPL) closed down more than -4%, and Tesla (TSLA) closed down more than -3%. Also, Nvidia (NVDA), Alphabet (GOOGL), and Amazon.com (AMZN) closed down more than -1%. In addition, Meta Platforms (META) closed down -0.94%, and Netflix (NFLX) closed down -0.69%.
Health insurance stocks were under pressure Thursday after UnitedHealth Group reported Q4 revenue of $100.81 billion, below the consensus of $101.68 billion. As a result, UnitedHealth Group (UNH) closed down more than -6% to lead losers in the S&P 500 and Dow Jones Industrials. Also, Humana (HUM), Molina Healthcare (MOH), Elevance Health (ELV), and Cigna Group (CI) closed down more than -1%.
US Bancorp (USB) closed down more than -5% after reporting Q4 total average deposits of $512.31 billion, below the consensus of $512.91 billion.
Texas Instruments (TXN) closed down more than -5% to lead losers in the Nasdaq 100 after Bloomberg reported that China is investigating allegations that the US is dumping lower-end chips and unfairly subsidizing its own chipmakers. Texas Instruments is one of the leaders of US-made lower-end chips.
Charles River Laboratories International (CRL) closed down more than -4% after Evercore ISI said the potential suspension of worldwide trade in wild monkeys from Cambodia could be a headwind to the company's earnings.
Datadog (DDOG) closed down more than -2% after Morgan Stanley downgraded the stock to equal weight from overweight.
Southwest Airlines (LUV) closed down more than -1% after Citigroup downgraded the stock to sell from neutral with a price target of $29.50.
PNC Financial Group (PNC) closed down more than -1% after predicting a 2-3% decline in net interest income in Q1, citing expected loan growth decline.
Chip stocks rallied Thursday after Semiconductor Manufacturing Co. forecasted 2025 capital spending of $38 billion-$42 billion, well ahead of the consensus of $35.1 billion. As a result, Lam Research (LRCX), KLA Corp (KLAC), and Applied Materials (AMAT) closed up more than +4%. Also, ASML Holding NV (ASML) closed up more than +3%, and Marvell Technology (MRVL) closed up more than +1%.
Dexcom (DXCM) closed up more than +5% to lead gainers in the S&P 500 after Baird upgraded the stock to outperform from neutral with a price target of $104.
Estee Lauder (EL) closed up more than +4% after Barclays raised its price target on the stock to $71 from $63.
Morgan Stanley (MS) closed up more than +4% after reporting preliminary Q4 equities trading revenue of $3.33 billion, stronger than the consensus of $2.63 billion.
Symbotic (SYM) closed up more than +19% after acquiring Walmart's Advanced Systems and Robotics business.
Life Time Group Holdings (LTH) closed up more than +6% after reporting Q4 preliminary adjusted EPS of 24 cents-25 cents, well above the consensus of 12 cents.
Monday.com (MNDY) closed up more than +3% after Citigroup upgraded the stock to buy from neutral with a price target of $298.
United Parcel Service (UPS) closed up more than +2% after Bank of America Global Research upgraded the stock to buy from neutral with a price target of $150.
Earnings Reports (1/17/2025)
Citizens Financial Group Inc (CFG), Fastenal Co (FAST), Huntington Bancshares Inc/OH (HBAN), Regions Financial Corp (RF), Schlumberger NV (SLB), State Street Corp (STT), Truist Financial Corp (TFC).
