Stock futures are well in the red this morning following a weak trading day yesterday. Data from China showed that its economy expanded 5.2% in the fourth quarter, missing analysts' expectations for higher growth and causing fears about its prospects in 2024. Other news today includes a Commerce Department report that December retail sales in the United States were up 0.6%, beating estimates of 0.4%. Overall, this report did not move the futures much, suggesting a weak start to the trading day.
The stock market started in the red yesterday as well, due to a few developments that hurt trader sentiment. These included Federal Reserve Governor Christopher Waller stating that the central bank will look to lower interest rates this year "methodically and carefully" and that he sees "no reason to move as quickly or cut as rapidly as in the past." Traders have been pricing six cuts into their forecasts for 2024, so a slower pace of rate cuts would likely keep borrowing expenses higher than the market's expectations. It should be noted that we do not currently project that six interest-rate cuts will occur. Elsewhere, a Federal judge blocked JetBlue Airways' (JBLU) proposed $3.8 billion takeover of Spirit Airlines (SAVE), which has somewhat cooled enthusiasm for mergers and acquisitions. Stocks largely traded down in the early portion of the day and trended lower through the afternoon hours. Overall, the indices finished the day well in the negative column. The S&P 500 fell 18 points (down 0.37%), the NASDAQ was off 28 points (down 0.19%), and the Dow Jones Industrial Average declined 232 points (down 0.86%). Market breadth was rather negative, as decliners outpaced advancers by a 3.4-to-1.0 ratio. The technology sector was the only one that finished in the green yesterday and represented the strongest segment. All other sectors finished lower, though energy issues were among the weakest.
In commodity news, oil prices were mostly choppy on Tuesday, but ultimately fell as traders priced in an oversupplied condition and weaker demand environment. Elsewhere, U.S. Treasury bond yields were mostly higher. The Chicago Board Options Exchange Volatility Index, or VIX, commonly known as the fear index, traded higher yesterday as traders demanded more protection against future volatility.
Several economic reports will be released in the coming days. These include initial jobless claims, the Philadelphia Fed manufacturing survey, home starts, and building permits on Thursday. On Friday, the University of Michigan Consumer Sentiment Index and existing home sales figures will be released. Elsewhere, dozens of companies will report quarterly results and 2024 outlooks. These include a number of mid-sized banks and other financial firms, such as Dow-30 component The Travelers Company (TRV) on Friday. - John E. Seibert III
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
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