Disappointing Data, Mixed Earnings Sink Stocks…..

U.S. stocks fell in the final session of a bumpy week ahead of a three-day holiday weekend, with Financials issues seeing pressure following mixed results from the banking sector to unofficially kick off Q4 earnings season. The markets appeared to shrug off President-elect Joe Biden’s $1.9 trillion fiscal plan that included increased direct payments to some households. Treasuries gained ground to trim a recent rise in yields, and the U.S. dollar moved higher. Meanwhile, gold and crude oil prices traded lower. The moves followed a host of economic data that was headlined by a third-straight monthly decline in retail sales for December and a larger-than-anticipated dip in January consumer sentiment, while industrial production continued to rebound. In equity news, Dow member JPMorgan Chase & Co topped Q4 earnings forecasts but offered some cautious commentary, while results from Citigroup and Wells Fargo were mixed, and Exxon Mobil is reportedly facing an SEC investigation. Europe finished mostly lower, while markets in Asia were mixed.

The Dow Jones Industrial Average lost 177 points (0.6%) to 30,814, the S&P 500 Index was down 27 points (0.7%) at 3,768, and the Nasdaq Composite decreased 114 points (0.9%) to 12,999. In heavy volume, 1.2 billion shares were traded on the NYSE and 6.3 billion shares changed hands on the Nasdaq. WTI crude oil dropped $1.21 to $52.36 per barrel. Elsewhere, the Bloomberg gold spot price tumbled $20.06 to $1,826.47 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.6% higher at 90.77. Markets were lower for the week, as the DJIA fell 0.9%, the S&P 500 decreased 1.5%, and the Nasdaq Composite declined 1.5%.

Retail sales and producer prices miss, January consumer sentiment dips more than expected…..

Advance retail sales for December fell 0.7% month-over-month (m/m), versus the Bloomberg forecast of a flat reading and following November’s negatively-adjusted 1.4% decline from a previously-reported 1.1% drop. Last month’s sales ex-autos dropped 1.4% m/m, compared to expectations of a 0.2% decrease and November’s figure was unfavorably revised to a 1.3% decline from a 0.9% fall. Sales ex-autos and gas were down 2.1% m/m, compared to estimates of a 0.3% decline, and November’s reading was adjusted lower to a 1.3% decrease from a 0.8% drop. The control group, a figure used to calculate GDP, declined 1.9% m/m, versus projections of a 0.1% increase and November’s downwardly-adjusted 1.1% decrease from a 0.5% decline.

The disappointing report came as non-store retail sales—which includes online activity—fell, along with sales of electronics & appliances and food & beverages, while activity at food services & drinking places and department stores also dropped. However, sales of motor vehicles, building materials, clothing and gasoline all posted gains. The data shows the impact of the reinstated COVID-19 measures aimed at containing the resurging virus cases, while likely illustrating the sense of urgency of delivering further fiscal relief that President-elect Joe Biden detailed last night in his $1.9 trillion plan.

The January preliminary University of Michigan Consumer Sentiment Index declined to 79.2 versus expectations of a dip to 79.5 from December’s 80.7 reading. The larger-than-expected decrease for the index came as both the current conditions and the expectations portions of the index declined. The 1-year inflation forecast jumped to 3.0% from December’s 2.5% rate, and the 5-10 year inflation forecast increased to 2.7% from December’s 2.5% level.

The Federal Reserve’s industrial production rose 1.6% m/m in December, comfortably above estimates of a 0.5% gain, and versus November’s upwardly-revised 0.5% increase. Manufacturing and mining output both rose solidly, accompanying a jump in utilities production. Capacity utilization increased to 74.5% versus forecasts calling for a modest gain to 73.6% from the prior month’s upwardly-revised 73.4% rate. Capacity utilization is 5.3 percentage points below its long-run average.

The Producer Price Index (PPI) showed prices at the wholesale level in December rose 0.3% m/m, below forecasts of a 0.4% gain and compared to November’s unrevised 0.1% increase. The core rate, which excludes food and energy, increased 0.1% m/m, south of estimates of a 0.2% rise and matching November’s unadjusted increase. Y/Y, the headline rate was 0.8% higher, in line with projections to match the prior month’s unadjusted gain. The core PPI increased 1.2% y/y last month, below estimates of a 1.3% gain, and compared to November’s unrevised 1.4% rise.

The Empire Manufacturing Index, a measure of activity in the New York region, declined to 3.5 in January from 4.9 in December, and below forecasts of a rise to 6.0. However, a reading above zero denotes growth. The report marks the seventh-straight month of expansion, as employment growth decelerated but the expansion in new orders accelerated.

Business inventories rose 0.5% m/m in November, matching forecasts, and compared to October’s upwardly-revised 0.8% gain.

Treasuries were higher following the data and yesterday’s comments from Federal Reserve Chairman Jerome Powell who suggested the Central Bank will remain highly accommodative for some time to help the employment front recover. Powell’s comments came amid some mixed commentary this week from other Fed officials that raised some uncertainty regarding the timing of when the Fed will begin to cut back on asset purchases. The rate on the 2-year note was down 1 basis point (bp) at 0.13%, while the yields on the 10-year note and the 30-year bond declined 3 basis points (bps) to 1.09% and 1.85%, respectively.

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