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U.S. stock markets closed higher on Tuesday as market participants were waiting for a key inflation data and a possible soft landing of the U.S. economy by the Fed. However, hawkish comments by the Fed Chairman and other officials remained major concern. All the three major stock indexes ended in positive territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) gained 0.6% or 186.45 points to close at 33,704.10. Notably, 24 components of the 30-stock index ended in positive territory while the remaining 6 in red. At its session low, the blue-chip index was down nearly 100 points.
The tech-heavy Nasdaq Composite finished at 10,742.63, surging 1% or 106.98 points due to strong performance of large-cap technology stocks. The tech-laden index posted a three-day winning streak, for the first time since November 2022.
The S&P 500 increased 0.7% to end at 3,919.25. Ten out of 11 broad sectors of the benchmark index closed in positive territory while one ended in negative zone. The Consumer Discretionary Select Sector SPDR (XLY), the Communication Services Select Sector SPDR (XLC) and the Materials Select Sector SPDR (XLB) rose 1.1%, 1.5% and 1%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was down 6.3% to 20.58. A total of 10.02 billion shares were traded on Tuesday, lower than the last 20-session average of 10.91 billion. Advancers outnumbered decliners on the NYSE by a 2.33-to-1 ratio. On Nasdaq, a 2.45-to-1 ratio favored advancing issues.
Possibility of a Soft Landing
The Department of Labor reported that the nonfarm payroll increased 223,000 in December beating the consensus estimate of 208,000. However, December’s job additions fell below November’s data that were revised downward to 256,000 from 263,000 reported earlier.
Hourly wage rate increased 0.3% in December below the consensus estimate of 0.4%. November’s data was revised downward to 0.4% from 0.6% reported earlier. Year over year, the hourly wage rate increased 4.6% in December compared with the consensus estimate of 5%. The wage rate increased 4.8% year over year in November.
A large section of market participants believe that peak inflation has already achieved. Less-than-expected inflation rates in October and November with respect to several measures have clearly indicated this.
The Institute of Supply Management reported that the services sector index for December plummeted to 49.6% in December from 56.5% in November. The consensus estimate was 55.1%. Any reading below 50% indicates a contraction in services activities. The index contracted for the first time since May 2020, at the onset of the coronavirus pandemic.
A devastated housing market owing to the high mortgage rate, disappointing retail sales in December, the peak festive season, huge inventory accumulation by several retailers, a stiff fall in U.S. manufacturing activities indicated that the U.S. economy is cooling in the desired direction of the Fed. Several U.S. corporate giants have started retrenching manpower significantly at higher level.
Hawkish Comments From Fed Officials
On Jan 10, in a speech delivered to Sweden’s Riksbank, Fed Chairman Jerome Powell said the central bank should be freed from political influence while it tackles persistently high inflation. Powell said “Price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time. But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy.”
Federal Reserve Governor Michelle Bowman said she expects more interest rate increases in 2023, and the higher rates to prevail for a while until inflation declines substantially.
On Jan 9, in an interview with The Wall Street Journal, San Francisco Fed President Mary Daly said she expects the central bank to boost interest rates above 5% to get inflation down. Daly said “I think something above 5 is absolutely, in my judgment, going to be likely.” Moreover, Atlanta Fed President Raphael Bostic said he expects the benchmark lending rate to rise above 5% in order to combat a sticky inflation.
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Stock Market News for Jan 11, 2023
U.S. stock markets closed higher on Tuesday as market participants were waiting for a key inflation data and a possible soft landing of the U.S. economy by the Fed. However, hawkish comments by the Fed Chairman and other officials remained major concern. All the three major stock indexes ended in positive territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) gained 0.6% or 186.45 points to close at 33,704.10. Notably, 24 components of the 30-stock index ended in positive territory while the remaining 6 in red. At its session low, the blue-chip index was down nearly 100 points.
The tech-heavy Nasdaq Composite finished at 10,742.63, surging 1% or 106.98 points due to strong performance of large-cap technology stocks. The tech-laden index posted a three-day winning streak, for the first time since November 2022.
The major gainer of Nasdaq Composite was Lucid Group Inc. (LCID - Free Report) , shares of which advanced 6.1%. The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The S&P 500 increased 0.7% to end at 3,919.25. Ten out of 11 broad sectors of the benchmark index closed in positive territory while one ended in negative zone. The Consumer Discretionary Select Sector SPDR (XLY), the Communication Services Select Sector SPDR (XLC) and the Materials Select Sector SPDR (XLB) rose 1.1%, 1.5% and 1%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was down 6.3% to 20.58. A total of 10.02 billion shares were traded on Tuesday, lower than the last 20-session average of 10.91 billion. Advancers outnumbered decliners on the NYSE by a 2.33-to-1 ratio. On Nasdaq, a 2.45-to-1 ratio favored advancing issues.
Possibility of a Soft Landing
The Department of Labor reported that the nonfarm payroll increased 223,000 in December beating the consensus estimate of 208,000. However, December’s job additions fell below November’s data that were revised downward to 256,000 from 263,000 reported earlier.
Hourly wage rate increased 0.3% in December below the consensus estimate of 0.4%. November’s data was revised downward to 0.4% from 0.6% reported earlier. Year over year, the hourly wage rate increased 4.6% in December compared with the consensus estimate of 5%. The wage rate increased 4.8% year over year in November.
A large section of market participants believe that peak inflation has already achieved. Less-than-expected inflation rates in October and November with respect to several measures have clearly indicated this.
The Institute of Supply Management reported that the services sector index for December plummeted to 49.6% in December from 56.5% in November. The consensus estimate was 55.1%. Any reading below 50% indicates a contraction in services activities. The index contracted for the first time since May 2020, at the onset of the coronavirus pandemic.
A devastated housing market owing to the high mortgage rate, disappointing retail sales in December, the peak festive season, huge inventory accumulation by several retailers, a stiff fall in U.S. manufacturing activities indicated that the U.S. economy is cooling in the desired direction of the Fed. Several U.S. corporate giants have started retrenching manpower significantly at higher level.
Hawkish Comments From Fed Officials
On Jan 10, in a speech delivered to Sweden’s Riksbank, Fed Chairman Jerome Powell said the central bank should be freed from political influence while it tackles persistently high inflation. Powell said “Price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time. But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy.”
Federal Reserve Governor Michelle Bowman said she expects more interest rate increases in 2023, and the higher rates to prevail for a while until inflation declines substantially.
On Jan 9, in an interview with The Wall Street Journal, San Francisco Fed President Mary Daly said she expects the central bank to boost interest rates above 5% to get inflation down. Daly said “I think something above 5 is absolutely, in my judgment, going to be likely.” Moreover, Atlanta Fed President Raphael Bostic said he expects the benchmark lending rate to rise above 5% in order to combat a sticky inflation.