/ January 15
Daily Briefing
*The stock market had a mixed session yesterday, but underlying the index level performance were some positive vibes under the surface; market participants were reacting to the cooler-than-expected inflation data released at 8:30 ET, which garnered a muted response from Treasuries and helped the upside bias in equities; there was also some momentum in play after the stock market staged a turnaround yesterday thanks to buy-the-dip interest;
*The December Producer Price Index (PPI) readings exceeded expectations, reflecting a welcome easing in inflationary pressures on a month-to-month basis; the year-over-year numbers were less market-friendly with PPI up 3.3% versus 3.0% in November, and core-PPI, which excludes food and energy, up 3.5%, unchanged from November;
*SPY was able to maintain fragile support at the 100 DMA ($578) and avert any further downside for now; there is a large cluster of resistance sitting just above the last close, with both the 20 and the 50 DMAs, as well as the M-Trend levels in the $584 - $604 range; notably, the 20-DMA has crossed below the 50-DMA, marking a bearish development and potential further selling pressure;
*The MACD signal continues to deteriorate and does not show any signs of turning into a bullish crossover for the moment;
*The main economic release for the day was the December PPI, which came in at 0.2%, lower than expectations of 0.3%; the better-than-expected monthly readings have been clouded by the less inspiring year-over-year readings (3.3%), as well as the understanding that inflation at the wholesale level moved in the wrong direction in 2024 (versus 2023) and remains elevated relative to the Fed's 2% inflation target; prices of services were unchanged;
*The choppy moves in the major indices were related to volatility in the mega cap space; NVIDIA (NVDA, -1.1%), Tesla (TSLA, -1.7%), and Alphabet (GOOG, -0.6%) traded lower with no specific news driving the movement while other names like Microsoft (MSFT, -0.4%), Eli Lilly (LLY, -6.6%), and Meta Platforms (META, -2.3%) reacted negatively to headlines;
*MSFT reportedly paused hiring in its US consulting unit as part of a cost-cutting plan, according to CNBC; LLY lowered Q4 revenue guidance; and META reacted to reports that TikTok US is not going to be sold after initial reporting suggested that may be the case;
*Small cap stocks soared while mega cap languished, leading the Russell 2000 to jump 1.1% from yesterday's close; this move was helped out by strength in its regional bank components, which outperformed in front of earnings reports from bank stocks later this week;
*The broader market jump helped sentiment jump from dismal levels;
*Strength in the bank space also led the Financials Sector ETF (XLF) to close +1.24% higher and the SPDR S&P Regional Banking ETF (KRE) to close +3.4% and regain a key technical level;
*Treasuries responded favorably, leading the 10-yr yield settled two basis points lower at 4.79% and the 2-yr yield settled four basis points lower at 4.36%;
*The fair reaction does not make TLT investible at the moment (or the broader treasuries asset class for that matter);