The futures market is well in the red this morning following a down day Tuesday in the stock market. Bond yields have been rising this morning after statements made by Richmond Federal Reserve President Thomas Barkin. Mr. Barkin stated that although he expects a “soft landing” for the U.S. economy, he noted that the Fed’s job of curtailing inflation may not be over. Traders have sold their positions, which have benefited from lower bond yields over the past few weeks, and this suggests a weaker start to the trading day. Later, the minutes of the December Fed Meeting will be released, as well as the Institute for Supply Management’s Manufacturing Index. These could well have an impact on trading later in the session.
The stock market started in the red yesterday to start 2024, as traders moved away from some of the big winners from 2023. Concerns about lagging iPhone sales, especially in China, caused shares of Apple (AAPL) to decline while investors sold off other technology names in tandem. Trading was choppy throughout the day, but the major indices ended mostly lower. Overall, the S&P 500 fell 27 points (0.57%), and the NASDAQ declined 245 points (1.63%). Still, the Dow Jones Industrial Average eked out a gain of 26 points (0.07%). Market breadth was slightly negative, favoring decliners by a 1.1-to-1.0 ratio. Healthcare and utilities stocks were among the best performers, while technology issues were among the weakest. This disparity was likely caused in part by portfolio rebalancing on the first day of the year, especially considering that utilities were among the worst-performing sectors in 2023, while the tech space soared far above other sectors.
In commodity news, oil prices fell yesterday as oversupply concerns hit the market. Traders have recently been concerned about transportation through the Red Sea, as Houthi rebels in Yemen have been targeting commercial vessels. Elsewhere, U.S. Treasury bond yields were largely higher across the board as market participants tempered some of their expectations of interest-rate cuts in 2024. Traders have been speculating that the Fed will lower short-term interest rates as many as six times this year, which remains far ahead of the Fed’s most recent projections. Also, the yield curve remains inverted, with short-term rates trading higher than those with longer durations. The Chicago Board Options Exchange Volatility Index, or VIX, commonly known as the fear index, rose yesterday as traders demanded more options protection to start the year.
Later this week, several economic reports are on the docket for release. These include the Standard & Poor’s final Services Purchasing Managers’ Index for December, initial jobless claims, and the Automatic Data Processing (ADP) employment report for December on Thursday. On Friday, the U.S. Labor Department Employment report, including hourly wages and the unemployment rate will be released. This data should give traders ample information on the state of employment across the country. - John E. Seibert III
At the time of this article’s writing, the author did not hold any positions in the companies mentioned.
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