Late-Day Push Higher Stalls, Stocks Finish Mixed…..
A late-afternoon move into positive territory lost steam and U.S. equities finished mixed, with the Dow able to notch another record high, but pressure from the Information Technology and Consumer Discretionary sectors hampered the S&P 500 and Nasdaq. Investors sifted through a host of mixed earnings reports from Dow members Cisco Systems and Coca-Cola, as well as General Motors, Twitter and Lyft. Meanwhile, in a webcast with the Economic Club of New York, Fed Chairman Jerome Powell painted a dour employment picture and stressed that monetary policy can’t alone fix the economy’s woes. However, signs of improving COVID-19 case trends, the continued rollout of vaccines, and heightened expectations of further U.S. fiscal relief kept sentiment somewhat elevated to tame the losses. The economic calendar delivered another subdued read on consumer price inflation, while mortgage applications declined and wholesale inventories were revised higher. Treasuries were higher, putting downward pressure on yields, and the U.S. dollar was little changed, while gold ticked to the upside and crude oil prices saw slight gains. Europe bounced off the lows of the day to finish mostly lower as the positive global sentiment was met with diverging economic and earnings data, while markets in Asia were higher.
The Dow Jones Industrial Average rose 62 points (0.2%) to 31,438, while the S&P 500 Index was down 1 point at 3,910, and the Nasdaq Composite lost 35 points (0.3%) to 13,973. In heavy volume, 978 million shares were traded on the NYSE and 10.3 billion shares changed hands on the Nasdaq. WTI crude oil added $0.32 to $58.68 per barrel. Elsewhere, the Bloomberg gold spot price rose $3.06 to $1,841.38 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 90.43.
Consumer price inflation remains subdued, mortgage applications decline, Fed Chief speaks…..
The Consumer Price Index (CPI) rose 0.3% month-over-month (m/m) in January, in line with the Bloomberg consensus estimate, and compared to December’s downwardly revised 0.2% increase. The core rate, which strips out food and energy, was flat m/m, versus expectations of a 0.2% gain and matching December’s downwardly adjusted reading. Y/Y, prices were 1.4% higher for the headline rate, below forecasts projecting a 1.5% increase and matching December’s unadjusted rise. The core rate was up 1.4% y/y, south of projections of a 1.5% gain and December’s unrevised 1.6% increase.
The Department of Labor said the gasoline index continued to increase, rising 7.4% m/m in January, accounting for most of the headline figure’s rise, while the food index rose slightly as an advance in the index for food away from home more than offset a decline in the index for food at home. For the core CPI rate, indexes for apparel, medical care, shelter and motor vehicle insurance all increased, while indexes for recreation, used cars and trucks, airline fares and new vehicles all declined.
The MBA Mortgage Application Index fell by 4.1% last week, following the prior week’s 8.1% gain. The decline came as the Refinance Index decreased 4.2% and the Purchase Index fell 4.7%. The average 30-year mortgage rate rose 4 basis points (bps) to 2.96%.
December wholesale inventories were revised higher to a 0.3% m/m gain, versus expectations to be unadjusted at the preliminary estimate of a 0.1% rise and compared to November’s unrevised flat reading. Sales gained 1.2% after November’s upwardly revised 0.3% gain.
In afternoon action, Federal Reserve Chairman Jerome Powell spoke at a webinar with the Economic Club of New York, painting a sobering picture of the state of the jobs market, saying that the U.S. is “a long way” from being back to where the country needs to be regarding employment, despite the headline unemployment rate that he said “dramatically understated” the damage from the pandemic. In his prepared remarks, Powell said, “Fully realizing the benefits of a strong labor market will take continued support from both near-term policy and longer-run investments so that all those seeking jobs have the skills and opportunities that will enable them to contribute to, and share in, the benefits of prosperity.” Powell offered no surprises with regard to the current path of monetary policy, but continued to stress that “it will require more than supportive monetary policy. It will require a society-wide commitment, with contributions from across government and the private sector.”
Treasuries were higher, as the rate on the 2-year note ticked 1 bp lower to 0.10%, the yield on the 10-year note declined 2 bps to 1.13%, and the 30-year bond rate decreased 3 bps to 1.92%.
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