Markets Post Solid Gains…..

U.S. equities finished solidly higher as the markets digested another dose of earnings, while looking ahead to the first look at the January inflation picture. Pfizer beat earnings expectations but missed slightly on revenue, while shares of Harley-Davidson benefitted from a surprising Q4 profit on a 32% jump in revenues. Meanwhile, Peloton Interactive posted a larger-than-expected loss and announced that its CEO is stepping down, while also saying that the company will cut jobs and slash about $800 million in annual costs. In economic news, small business optimism declined more than expected and dropped to its lowest level in 11 months, while the U.S. trade deficit further widened but less than expected. Treasuries were lower as yields rose across the curve, and the U.S. dollar gained ground, while crude oil prices fell, and gold traded higher. Markets in Europe and Asia finished mixed with monetary policy remaining in focus.

The Dow Jones Industrial Average rose 372 points (1.1%) to 35,463, the S&P 500 Index increased 38 points (0.8%) to 4,522, and the Nasdaq Composite gained 179 points (1.3%) to 14,194. In heavy volume, 4.3 billion shares of NYSE-listed stocks were traded, and 4.2 billion shares changed hands on the Nasdaq. WTI crude oil lost $1.96 to $89.36 per barrel. Elsewhere, the gold spot price traded $6.40 higher to $1,822.80 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—advanced 0.1% to 95.44.

The National Federation of Independent Business (NFIB) Small Business Optimism Index for December ticked lower to 97.1 from December’s 98.9 level, versus the Bloomberg estimate of a decline to 97.5. The report pointed out that small business owners remain wary of high inflation, worker shortages, and future economic conditions. The NFIB said, “More small business owners started the new year raising prices in an attempt to pass on higher inventory, supplies, and labor costs. Owners are also raising compensation at record high rates to attract qualified employees to their open positions.”

The trade balance showed that the December deficit widened but less than expected, rising to $80.7 billion, from November’s downwardly-revised deficit of $79.3 billion, and compared to forecasts of an increase to $83.0 billion. Exports rose 1.5% month-over-month (m/m), and imports increased 1.6%.

Treasuries were lower, with the yields on the 2-year and 10-year notes up 5 basis points (bps) at 1.34% and 1.96%, respectively, while the 30-year bond rate rose 4 bps to 2.25%.

©2022 Charles Schwab & Co., Inc. All rights reserved. Member SIPC.

Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.