The futures markets are well in the green this morning, following the close of the stock market for the New Year's Day national holiday. Though the markets ended the day in the red on Tuesday, the S&P 500 posted a 20% annual advance for a second-consecutive year, representing the first time since 1997 and 1998 that the Index has reached that mark. This was helped by improving sentiment for artificial intelligence (AI) technology, as well as the easing of inflationary pressures and several interest-rate cuts by the Federal Reserve in September 2024. Stock futures moved higher this morning following the release of the initial jobless claims report, showing that claims declined sequentially by 9,000 to 211,000, marking the lowest figure since April of 2024. Overall, these factors suggest a strong start to the trading day.
The stock market started negatively on Tuesday and headed lower once the S&P Case Shiller home price index showed home prices were up 4.2% year over year in November. This remains a key input into inflationary data that the Federal Reserve utilizes to make interest rate policy. Markets largely trended lower throughout Tuesday's trading session and ended near their lows. Overall, the S&P 500 fell 25 points (down 0.43%), the NASDAQ declined 176 points (down 0.90%), and the Dow Jones Industrial Average was off 30 points (down 0.07%). Despite the lower prices, market breadth was quite good, with advancers outpacing decliners by a 1.7-to-1.0 ratio. Energy issues were amongst the top performers, while technology issues were amongst the weakest.
In oil news, prices have continued to rise over the past 48 hours, given improving sentiment for oil demand out of Asia amid higher expectations of growth in the region. Elsewhere, U.S. Treasury bond yields rose across the board on Tuesday, suggesting that traders were selling bonds. The Chicago Board Options Exchange Volatility Index, or VIX, was little changed Tuesday, despite a down day in the markets, as traders were largely unmoved by the day's action.
Few economic reports are slated to come out over the rest of this week, but the Institute for Supply Management will release its Manufacturing Survey results on Friday. Additionally, Richmond Fed President Tom Barkin will give remarks on the economy to the First Friday Economic Outlook Forum on January 3rd. Elsewhere, earnings season will start to pick up next week, as major banks lead the parade.
-John E. Seibert
At the time of this article’s writing, the author held positions in none of the companies mentioned.
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