The S&P 500 Index ($SPX) (SPY) Tuesday closed up +0.11%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.52%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.13%. March E-mini S&P futures (ESH25) are up +0.27%, and March E-mini Nasdaq futures (NQH25) are up +0.11%.
Stocks on Tuesday settled mixed. The overall market garnered support Tuesday from a report from Bloomberg that said President-elect Trump’s economic team is considering a gradual ramp-up in trade tariffs in a strategy to avert a spike in inflation. Stocks also found support after US Dec producer prices rose less than expected, reducing inflation concerns and boosting expectations for a friendly US CPI report on Wednesday.
However, stock indexes fell back from their best levels and turned mixed on some negative corporate news. Eli Lilly tumbled more than -6% after reporting Q4 preliminary revenue below consensus. Also, Meta Platforms fell more than -2% after it said it plans to cut 5% of its staff through performance-based eliminations. In addition, weakness in megacap technology stocks weighed on the broader market.
Bloomberg reported that President-elect Trump’s incoming economic team is considering graduated tariff hikes of about 2% to 5% a month rather than aggressive one-time increases to avert inflation spikes.
The US Dec PPI final demand rose +0.2% m/m and +3.3% y/y, weaker than expectations of +0.4% m/m and +3.5% y/y. Also, Dec PPI ex-food and energy was unchanged m/m and rose +3.5% y/y, weaker than expectations of +0.3% m/m and +3.8% y/y.
The markets are looking toward Wednesday’s US consumer price report to see if sticky price pressures will keep the Fed from cutting interest rates. Dec CPI is expected to accelerate to +2.9% y/y from +2.7% y/y in Nov, and Dec core CPI to remain unchanged from Nov at +3.3% y/y. Also, Thursday’s US retail sales report will garner attention to see if consumer spending is holding up (Dec retail sales expected +0.6% m/m).
Earnings season begins this week as banks begin reporting Q4 earnings. Citigroup, JPMorgan Chase, Goldman Sachs, and Wells Fargo will report earnings results on Wednesday. According to Bloomberg Intelligence, analysts estimate S&P 500 earnings to grow 7.5% in Q4, the second-highest pre-season forecast in the past three years.
The markets are discounting the chances at 3% for a -25 bp rate cut at the January 28-29 FOMC meeting.
Overseas stock markets Tuesday settled mixed. The Euro Stoxx 50 closed up +0.53%. China’s Shanghai Composite Index closed up +2.54%. Japan’s Nikkei Stock 225 fell to a 6-week low and closed down -1.83%.
Interest Rates
March 10-year T-notes (ZNH25) Tuesday closed up +4 ticks. The 10-year T-note yield fell -0.2 bp to 4.788%. Mar T-notes Tuesday posted modest gains on a Bloomberg report that said President-elect Trump’s incoming economic team is considering gradual tariff hikes to avert a spike in inflation. T-notes also found support on Tuesday’s weaker-than-expected US Dec producer price report.
Limiting gains in T-notes Tuesday was some negative carryover from weakness in European government bonds. Also, rising inflation expectations are bearish for T-notes as the 10-year breakeven inflation rate rose to a 14-1/2 month high Tuesday at 2.476%. In addition, supply pressures weigh on T-notes with expected pricing of $40 billion to $45 billion of corporate debt securities this week, which prompts bond dealers to short 10-year T-note futures as a hedge against the incoming supply.
European government bond yields Tuesday moved higher. The 10-year German bund yield rose to a 7-month high of 2.653% and finished up +3.9 bp to 2.652%. The 10-year UK gilt yield rose +0.5 bp to 4.889%.
ECB Governing Council member Holzmann said it’s unclear if the ECB will lower interest rates again at its January 30 policy meeting, citing “hiccups” in Eurozone inflation.
Swaps are discounting the chances at 97% for a -25 bp rate cut by the ECB at its January 30 policy meeting.
US Stock Movers
Homebuilders rose Tuesday, with KB Home (KBH) closing up more than +4% after reporting Q4 EPS of $2.52, stronger than the consensus of $2.44. Also, DR Horton (DHI), PulteGroup (PHM), and Toll Brothers (TOL) closed up more than +3%. In addition, Lennar (LEN) closed up more than +2%.
United Rentals (URI) closed up more than +5% to lead gainers in the S&P 500 after acquiring H&E Equipment Services, the 6th biggest company in the US rental sector, which will immediately increase United Rental’s market share.
Celanese Corp (CE) closed up more than +5% after Bank of America Global Research double-upgraded the stock to buy from underperform with a price target of $88.
H&E Equipment Services (HEES) closed up more than +104% after United Rentals agreed to buy the company for $3.4 billion in cash.
Atlassian (TEAM) closed up more than +4% to lead gainers in the Nasdaq 100 after announcing price increases for its data center products.
Medtronic Plc (MDT) closed up more than 4% after the Centers for Medicare and Medicaid Services said it is opening a national coverage analysis on renal denervation, which could support Medicare beneficiary access to Medtronic’s Symplicity Spyral renal denervation system used in the Symplicity blood pressure procedure.
A O Smith (AOS) closed up more than 3% after Oppenheimer & Co upgraded the stock to outperform from market perform with a price target of $88.
Eastman Chemical (EMN) closed up more than +2% after Bank of America Global Research upgraded the stock to buy from neutral with a price target of $109.
ELI Lilly (LLY) closed down more than -6% to lead losers in the S&P 500 after reporting Q4 preliminary revenue of $13.5 billion, below the consensus of $14.0 billion.
Megacap technology stocks were under pressure Tuesday and weighed on the overall market. Nvidia (NVDA), Netflix (NFLX), and Alphabet (GOOGL) closed down more than -1%. Also, Apple (AAPL) closed down -0.48%, Microsoft (MSFT) closed down -0.36% and Amazon.com (AMZN) closed down -0.32%.
Signet Jewelers (SIG) closed down more than -21% after cutting its Q4 sales forecast to $2.32 billion-$2.34 billion from a previous estimate of $2.38 billion-$2.46 billion, well below the consensus of $2.41 billion.
Charles River Laboratories (CRL) closed down more than -6% after it said it expects 2025 non-GAAP operating margin will be modestly below the estimated 2024 level.
Perrigo Co. (PRGO) closed down more than -3% after Argus Research downgraded the stock to hold from buy.
Meta Platforms (META) closed down more than -2% after it said it plans to cut 5% of its staff through performance-based eliminations.
Regeneron Pharmaceuticals (REGN) closed down more than -3% after Citigroup cut its price target on the stock to $795 from $895.
Archer-Daniels-Midland (ADM) closed down more than -1% after Bank of America Global Research downgraded the stock to underperform from neutral.
Earnings Reports (1/15/2025)
Bank of New York Mellon Corp/T (BK), Blackrock Inc (BLK), Citigroup Inc (C), Goldman Sachs Group Inc/The (GS), JPMorgan Chase & Co (JPM), Wells Fargo & Co (WFC).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
/Microsoft%20Corporation%20logo%20on%20phone-by%20rafapress%20via%20Shuterstock.jpg)