Stocks fall, yields inch higher; focus on upcoming US inflation data, earnings
January 10, 2024
Linea Mercati Interview 1/9/24
January 10, 2024By Andrew Keshner Follow and Jamie Chisholm
U.S. stocks are lower Tuesday as investors rethink the chances of a near-term interest rate cut by the Federal Reserve while waiting for inflation data and earnings results later in the week.
How stocks are trading
- The S&P 500 dropped 13 points, or 0.2%, to 4,749
- The Dow Jones Industrial Average fell 220 points, or 0.5%, to 37,462
- The Nasdaq Composite eased 24 points, or 0.1%, to 14,819
On Monday, the Dow Jones Industrial Average DJIA rose 217 points, or 0.58%, to 37683, the S&P 500 SPX increased 66 points, or 1.41%, to 4764, and the Nasdaq Composite COMP gained 320 points, or 2.2%, to 14844.
What’s driving markets
Investors are retracing their some of their steps Tuesday after a Monday jolt forward.
After a several soft days to begin 2024, the S&P 500 bounced 1.4% and the Nasdaq Composite surged 2.2% on Monday, with big technology stocks such as Apple AAPL, -0.50%, up 2.4%, and Nvidia NVDA, 2.15% jumping 6.4% leading the charge.
Wall St. rallies after soft start to 2024Index performanceSource: FactSetAs of Jan. 8, 4 p.m. ET
Jan. 3Jan. 8-2.0-1.5-1.0-0.500.51.0%COMPSPXDJIA
Helping reignite the rally was a brief dip back below 4% for the 10-year Treasury yield as investors welcomed news that U.S. consumers’ one-year inflation expectations were at their lowest since January 2021. U.S. bond yields were holding steady Tuesday morning.
However, early Tuesday’s tech sector trade was losing some shine after a profit warning from South Korea’s Samsung Electronics 005930, -2.35% pointed at weak consumer demand after it reported its sixth straight quarter of declining operating earnings.
“I think the warning from Samsung spooked the market,” Peter Cardillo, chief market economist at Spartan Capital Securities, told MarketWatch.
“The market is a little bit nervous because of that warning, and the next big hurdle to cross is the inflation data and earnings data,” he said.
But the Federal Reserve still remains the biggest plot theme Tuesday, said Sonu Varghese, vice president, global macro strategist at Carson Wealth.
The market is pricing in a 59% chance that the Federal Reserve will start lowering interest rates at its March policy meeting, according to the CME FedWatch tool. That’s down from a nearly 70% chance one week ago.
“We’re a long way from saying March is a certainty and I think the market is coming to terms with that,” Varghese said.
Read also: Why stock-market bulls should be careful what they wish for on Fed rate cuts
So there’s tax-motivated profit-taking that’s occurring with the flip into 2024, Varghese said. There’s also selling on the idea that perhaps Wall Street was getting too optimistic late last year about the pace and extent of interest rate cuts this year, he added.
Investors have a Fed speaker to consider Tuesday also. Michael Barr, the central bank’s vice chair for supervision, will take part in a discussion at noon.
On Monday, Federal Reserve Governor Michelle Bowman said inflation could retreat without further rate hikes but the economy wasn’t at a point yet where rate cuts were needed, she said.
A key update on inflation will come on Thursday, when the consumer price index for December will be released.
Meanwhile, earnings season kicks off on Friday with quarterly results from the big banks.
Though some of the bigger data points are coming at the end of the week, investors still have data Tuesday to consider. The trade deficit narrowed 2% to $63.2 billion in November. The deficit is shaping up to be the smallest in three years.
