Early Gains Evaporate as Stocks Slide in Final Hour…..

U.S. equities reversed course in the final hour of trading and finished lower, erasing solid early gains and adding to weekly losses. Volatility that has marred action all week has come amid increased expectations that the Fed is set to get more aggressive in the wake of persistent inflationary pressures. News on the economic front was mixed, as manufacturing in the Philadelphia region moved further into expansion territory, but weekly initial jobless claims increased more than expected, continuing to bounce off its post-pandemic low, and existing home sales declined for the first time in four months. In equity news, Dow member Travelers Companies topped Q4 earnings estimates, Union Pacific bested the Street’s expectations on double-digit revenue growth, while United Airlines and American Airlines both posted quarterly losses that were narrower than what was predicted. Treasuries were mixed, and the U.S. dollar moved higher, while gold lost ground, and crude oil prices traded modestly to the downside. Europe finished mostly higher with Tech stocks leading the way, while markets in Asia were mixed after China lowered its loan prime rates.

The Dow Jones Industrial Average fell 313 points (0.9%) to 34,715, the S&P 500 Index dropped 50 points (1.1%) to 4,483, and the Nasdaq Composite declined 186 points (1.3%) to 14,154. In heavy volume, 4.5 billion shares of NYSE-listed stocks were traded, and 5.0 billion shares changed hands on the Nasdaq. WTI crude oil lost $0.25 to $85.55 per barrel. Elsewhere, the gold spot price declined $4.30 to $1,838.90 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—rose 0.3% to 95.80.

Initial jobless claims unexpectedly increase and existing home sales drop…..

Weekly initial jobless claims came in at a level of 286,000 for the week ended January 15, versus estimates of 225,000, and versus the prior week’s upwardly-revised 231,000 level. The four-week moving average increased by 20,000 to 231,000, and continuing claims for the week ended January 8 increased by 84,000 to 1,635,000, above estimates of 1,563,000. The four-week moving average of continuing claims fell by 55,250 to 1,664,250.

The Philly Fed Manufacturing Business Outlook Index moved further into expansion territory (a reading above zero) for January. The index increased to 23.2 versus estimates of an increase to 19.0 from December’s 15.4 level.

Existing home sales decreased 4.6% month-over-month (m/m) in December to an annual rate of 6.18 million units, snapping a three-month winning streak, and versus the Bloomberg expectation of 6.42 million units, after November’s upwardly-revised 6.48 million rate. Existing home sales were lower in all four major U.S. regions both on a m/m and y/y basis. Sales of single-family homes and of condominiums and co-ops were lower from the both the prior month and year. The median existing home price was up 15.8% from a year ago to $358,000, marking the 118th straight month of y/y gains. Unsold inventory was at a 1.8-months pace at the current sales rate, down from the from the 2.2-months pace a year earlier. Existing home sales reflect contract closings instead of signings and account for a large majority of the home sales market.

National Association of Realtors Chief Economist Lawrence Yun said, “December saw sales retreat, but the pull-back was more a sign of supply constraints than an indication of a weakened demand for housing,” adding that, “Sales for the entire year finished strong, reaching the highest annual level since 2006.” Yun noted, however, that he does expect existing-home sales to slow slightly in the coming months due to higher mortgage rates, but that recent employment gains and stricter underwriting standards are in place to help mitigate the danger of home sales “crashing.”

Treasuries were mixed, as the yield on the 2-year note was up 3 basis points (bps) to 1.04%, while the yield on the 10-year note was flat at 1.83%, and the 30-year bond rate ticked 1 basis point lower to 2.13%.

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