Stocks Push Higher on US Economic Optimism

The S&P 500 Index ($SPX) (SPY) today is up +0.38%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.21%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.59%.  March E-mini S&P futures (ESH26) are up +0.42%, and March E-mini Nasdaq futures (NQH26) are up +0.63%.

Stock indexes are climbing today on optimism in the US economic outlook. Signs of a resilient US labor market are supportive of stocks after the Dec unemployment rate declined and average hourly earnings rose more than expected, despite a smaller-than-expected increase in Dec nonfarm payrolls.  US housing news was also mixed, as October housing starts unexpectedly fell to a 5.5-year low, while building permits rose more than expected.  Stock indexes added to their gains after the University of Michigan's US Jan consumer sentiment index rose more than expected.

Home builders and home building suppliers are rallying today after President Trump late Thursday called for Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds in an attempt to lower longer-term rates and spur housing demand. 

US stocks have carryover support from rallies in global equity markets.  Europe’s Euro Stoxx 50 climbed to a new record high today, and China’s Shanghai Composite Stock Index rallied to a 10.5-year high.

The Supreme Court today deferred on the legality of President Trump’s tariffs.  The court hasn’t said when it will issue its next opinion, but could schedule more releases in the next two weeks.

Higher bond yields today are negative for stocks after the 10-year T-note yield climbed to a 4-week high of 4.20%. 

US Dec nonfarm payrolls rose +50,000, weaker than expectations of +70,000.  Also, Nov nonfarm payrolls were revised lower to +56,000 from the previously reported +64,000.  The Dec unemployment rate fell -0.1 to 4.4%, showing a stronger labor market than expectations of 4.5%.

US Dec average hourly earnings rose +3.8% y/y, stronger than expectations of +3.6% y/y.

US Oct housing starts unexpectedly fell -4.6% m/m to a 5.5-year low of 1.246 million, weaker than expectations of 1.330 million.  Oct building permits, a proxy for future construction, fell -0.2% to 1.412 million, stronger than expectations of 1.350 million. 

The University of Michigan US Jan consumer sentiment index rose +1.1 to 54.0, stronger than expectations of 53.5.

The University of Michigan US Jan 1-year inflation expectations were unchanged from Dec at 4.2%, stronger than expectations of a decline to 4.1%.  The Jan 5-10 year inflation expectations rose to +3.4% from 3.2% in Dec, stronger than expectations of 3.3%.

The markets are discounting the odds at 5% for a -25 bp rate cut at the FOMC’s next meeting on January 27-28.

Overseas stock markets are moving higher today.  The Euro Stoxx 50 rallied to a new record high and is up +1.37%.  China’s Shanghai Composite climbed to a 10.5-year high and closed up +0.92%.  Japan’s Nikkei Stock 225 closed up +1.61%.

Interest Rates

March 10-year T-notes (ZNH6) today are up by +1 tick.  The 10-year T-note yield is down -0.2 bp to 4.165%.  Mar T-notes recovered from a 4-week low today, and the 10-yer T-note yield fell from a 4-week high of 4.203%.  T-noted recovered early losses today after the Supreme Court deferred on the legality of President Trump’s tariffs.  The court hasn’t said when it will issue its next opinion, but it could schedule more releases in the next two weeks.  If the Supreme Court were to strike down Mr. Trump’s tariffs, T-note yields could rise as the removal of tariff revenue worsens the US budget deficit.   

T-notes also found support after President Trump late Thursday called for Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds in an attempt to lower longer-term rates and spur housing demand. 

T-notes initially moved lower today due to strength in stocks. Also, today’s mixed US payroll report reduces the chance of a near-term Fed rate cut after the Dec unemployment rate ticked lower and average hourly earnings rose more than expected, hawkish factors for Fed policy.  Rising inflation expectations are also bearish for T-notes after the 10-year breakeven inflation rate rose to a 1.5-month high today at 2.296%.

European government bond yields are mixed today.  The 10-year German bund yield is unchanged at 2.863%.  The 10-year UK gilt yield fell to a 1.75-month low of 4.380% and is down -2.1 bp to 4.383%.

Eurozone Nov retail sales rose +0.2% m/m, stronger than expectations of +0.1% m/m, and Oct retail sales were revised upward to +0.3% m/m from the previously reported unchanged m/m.

German Nov industrial production unexpectedly rose +0.8% m/m, stronger than expectations of -0.7% m/m.

ECB Governing Council member Dimitar Radev said, "The current level of interest rates can be assessed as appropriate in terms of the available information and the inflation outlook."

Swaps are discounting a 1% chance of a +25 bp rate hike by the ECB at its next policy meeting on February 5.

US Stock Movers

Home builders and building suppliers are climbing today after President Trump called for Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds in an attempt to lower longer-term rates and spur housing demand.  Builders FirstSource (BLDR) is up more than +7%, and Lennar (LEN), PulteGroup (PHM), and DR Horton (DHI) are up more than +4%.  Also, Toll Brothers (TOL) and KB Home (KBH) are up more than +3%.

Power producers are soaring today after Meta Platforms agreed to a series of electricity deals for its data centers.  Vistra (VST) is up more than +13% to lead gainers in the S&P 500, and Oklo (OKLO) is up more than +12%.  Also, NuScale Power (SMR) is up more than +5%, and Constellation Energy (CEG) and NRG Energy (NRG) are up more than +4%.

Chipmakers and data storage companies are moving higher today and supporting gains in the broader market. Sandisk (SNDK) is up more than +8%, and Lam Research (LRCX) is up more than +6% to lead gainers in the Nasdaq 100.  Also, Intel (INTC) is up more than +5%, and ASML Holding NV (ASML) and KLA Corp (KLAC) are up more than +4%.  In addition, Applied Materials (AMAT), Seagate Technology Holdings Plc (STX), Micron Technology (MU), and Broadcom (AVGO) are up more than +3%.

Retailers retreated today after the Supreme Court deferred a ruling on the legality of President Trump’s tariffs, leaving market uncertainty.  Lululemon Athletica (LULU) is down more than -4% to lead losers in the S&P 500.  Also, Kohl’s (KSS) is down more than -3%, and Best Buy (BBY) and American Eagle Outfitters (AEO) are down more than -1%. 

Rocket Cos (RKT) is up more than +6% after President Trump said he was directing Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds.

Lockheed Martin (LMT) is up more than +4% after Truist Securities upgraded the stock to buy from hold with a price target of $605.

Carvana (CVNA) is up more than +4% after Morgan Stanley raised its price target on the stock to $750 from $700.

Revolution Medicines (RVMD) is up more than +3% after the Financial Times reported that Merck & Co is in talks to buy the company.

Southwest Airlines (LUV) is up more than +2% after JPMorgan Chase double-upgraded the stock to overweight from underweight with a price target of $60. 

Insmed Inc (INSM) is up more than +2% after announcing it expects 2026 global ARIKAYCE revenues between $450 million and $470 million, above 2025 guidance of $433.8 million. 

AXT Inc (AXTI) is down more than -8% after forecasting Q4 revenue of $22.5 million to $23.5 million, well below the consensus of $28.8 million.  

WD-40 Co. (WDFC) is down more than -6% after reporting Q1 EPS of $1.28, weaker than the consensus of $1.45.

HealthEquity (HQY) is down more than -3% after Goldman Sachs downgraded the stock to sell from neutral with a price target of $89.

Qualcomm (QCOM) is down more than -2% after Mizuho Securities downgraded the stock to neutral from outperform and lowered its price target to $175 from $200.

Mattel (MAT) is down more than -2% after Goldman Sachs downgraded the stock to neutral from buy.

Olin Corp (OLN) is down more than -2% after cutting its Q4 adjusted Ebitda forecast to $67 million from a prior forecast of $110 million to $139 million, well below the consensus of $121.1 million. 

Earnings Reports(1/9/2026)

None.