The U.S. stock market may well edge higher this morning, following a somewhat weak session yesterday. Investor sentiment seems to be improving after Taiwan Semiconductor Manufacturing Co. Ltd. (TSM), a major international technology company, delivered an impressive report earlier this morning. The news should provide support for the technology sector, which has been benefiting from optimism about artificial intelligence (AI) applications. As we were writing this update, the S&P 500 Index futures were up roughly 20 points (0.40%) in pre-market trading.
In the economic arena, yesterday investors received a better-than-expected U.S retail sales report. Normally, that news would be a plus. However, Wall Street had a mixed reaction, fearing that the Federal Reserve may now be in no rush to cut interest rates. Today, we will get a look at the latest weekly initial jobless claims, a regional manufacturing report, and the December housing starts. Meanwhile, the Federal Reserve will also be an area of focus. Here, a handful of the central bank’s officials have made presentations over the past few days, and several more are scheduled to make speeches today and tomorrow. It should be noted that traders have been acting under the assumption that a number of cuts in interest rates will be forthcoming, and could start as early as March. Any change to that thesis would likely have an impact on the fixed-income and equity markets. We have noticed that the yield on the 10-year Treasury bond has been inching back over the 4% mark lately, which also puts pressure on stocks.
In the corporate arena, the fourth-quarter earnings season continues to unfold. Today, the focus will be on the banks. Earlier this morning, we received reports from M&T Bank (MTB) and Key Corp. (KEY). On Friday, we will hear from Travelers Companies (TRV), a member of the Dow Jones Industrial Average.
The stock market may be running into some slight resistance at this juncture. A few days ago, the S&P 500 Index moved back up to the 4,800 level, in an effort to break into new high ground. However, that advance stalled, and stocks started to pull back. The 4,800 level may hold technical significance, since this area proved hard to breach on a couple of occasions in the past. It is difficult to speculate where stocks may be headed, but a pause in the action would be understandable, given the massive gains logged over the past few months. Investors may simply need a chance to get acclimated to the market at its current level, while developing a better sense of direction. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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