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Markets Slide on Mostly Positive Earnings, Economic Data

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Markets continue their slide this Hump Day, with a new Beige Book this afternoon demonstrating mild strength in most areas and modest declines in others. There was also a North American Home Builders Confidence Index for January out today, showing the biggest jump month-over-month since the Great Reopening first got underway in mid-2020, to the highest level, 44, since September. A cycle low of 34 came in November of last year. Finally, Industrial Production and Capacity Utilization both outperformed expectations and moved higher from the previous month.

Even still, the Dow shed another -94 points, -0.25%, by today’s close, with the S&P 500 dropping -0.56%. The Nasdaq was close by, -0.59% on the day, while the small-cap Russell 2000 slid another -0.97%. Year to date, only the tech-heavy Nasdaq is still in the green, +0.61%, with the Dow and S&P modestly negative. The small-cap Russell, however, has been in a hurry to give back some of its big gains at the end of 2023, and has since coughed up -5.16% year to date.

That said, we’re still off late-October lows, which came about when bond yield rates ramped up, with the 10-year going above +5% for a moment. Yields have been going up again of late, with no Fed rate cut definitively on the near-term horizon with such healthy economic numbers. The 10-year crept above +4.1%, but we also see the narrowest inversion in bond yields since the early weeks of the inversion back in July 2022: +0.15%. Perhaps we’ll finally flatten this curve out for the first time in almost 18 months.

Economic growth concerns overseas are also weighing on market sentiment, with China now posting its lowest growth numbers in more than 30 years. Also, with major international conflicts continuing in Ukraine and Gaza/Red Sea, analysts are keeping a close eye on China’s intentions for Taiwan — such as, will it launch an attack on the country and its roughly 90% of the world’s semiconductor capacity with it? None of today’s Retail Sales, Import Prices, etc. were surprising enough to take investors’ minds completely off these other matters.

Alcoa (AA - Free Report) outperformed on its Q4 bottom line, notching a loss of -$0.56 per share compared to -$0.99 in the Zacks consensus, with revenues of $2.6 billion narrowly missing the $2.61 billion analysts were looking for. Discover Financial Services (DFS - Free Report) , on the other hand, posted a big miss on its Q4 earnings after today’s close, $1.54 per share versus $2.50 expected. Revenues, however, beat estimates, posting $4.2 billion versus $4.1 anticipated. Alcoa and Discover shares are both down in late trading, -3% and -8%, respectively.

Weekly Jobless Claims, Housing Starts & Building Permits and Philly Fed manufacturing all await us before tomorrow’s opening bell. Earnings results from companies like J.B. Hunt (JBHT - Free Report) and PPG (PPG - Free Report) will also be on hand to help color in the lines of the final quarter of last year. Will we finally get a bid higher in the markets as a result? Perhaps once they figure they’ve taken enough air out of the valuation balloon.

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