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January 13, 2025
DOW: 42029.40
S&P: 5786.00
Nasdaq: 18896.90
10YR T-Note: 4.77%
Bitcoin: 91359.41
VIX: 21.08
Gold:2688.30
Crude Oil:76.69
Prices Current as of 10 :11 am
Source: CNBC
Don Selkin, the creator and innovator of the "Fair Value" numbers, as its Chief Market Strategist on the Newbridge platform has given CNBC and its Predecessor, these numbers every day for the over 40 years - never missing a single day, as well as given the fair value for the Nasdaq 100 futures since their introduction in 1996 and the Dow Jones stock index futures since 1997. Mr. Selkin has also been quoted in several publications including but not limited to Bloomberg News, New York Post, Reuters, and The New York Times. Mr. Selkin's Fair Value numbers are included in the U.S.
Futures Report broadcast on CNBC every day before the market
opens attributing "Newbridge Securities" as the source. In addition, NSC provides to its professionals, their clients and the public access to Don Selkin's more in depth financial market views.
U.S. stocks fell sharply on Friday on worries that the “good news is bad news” syndrome may be too good by keeping inflation and interest rates high.
The S&P 500 tumbled 1.5% to close its fourth losing week in the last five. The Dow Jones Industrial Average dropped 696 points, or 1.6%, and the Nasdaq composite sank 1.6%.
Stocks took their cue from the bond market, where yields leaped to crank up the pressure after a report said U.S. employers added many more jobs to their payrolls last month than economists expected.
Such strength in hiring is of course good news for workers looking for jobs. But it could also keep upward pressure on inflation by keeping the overall economy going at a strong pace. But that in turn could prevent the Federal Reserve from cutting interest rates further that investors would like to see.
The Fed has already indicated it is likely to ease rates fewer times this year than it earlier expected because of worries about higher inflation. That is partly because some officials are taking the possibility of tariffs and other policies from the new President could worsen inflation.
Friday’s jobs report may not be as strong as it seems on the surface. While the overall number of hires in December blew past expectations, manufacturing is still getting crushed.
The raises in pay that workers are getting are also an important data point for the Fed, and gains in average hourly earnings were below 4% last month, which is what the Fed wants to see.
The nuanced takes helped Treasury yields give back some of their initial bursts following the release of the jobs report. But preliminary results from a separate report later in the morning underscored the issue. It suggested U.S. consumers are getting more pessimistic about where inflation is heading.
Consumers are expecting inflation in the coming year to be 3.3%, up from their expectation of 2.8% last month. It is the highest reading in the University of Michigan’s survey since May. Expectations are worsening across different types of Americans, particularly for households that make less in income.
The problem for investors is that when traders were sending U.S. stock indexes to dozens of records last year, they were banking on a stream of rate cuts coming from the Fed. If fewer cuts materialize than expected, stock prices would likely either need to fall, or profits at companies would have to rise more strongly to make up for it.
Smaller companies can take worse hits from higher interest rates than their bigger rivals because of the need for many to borrow to grow. The Russell 2000 index of smaller stocks slumped 2.2% and is now getting close to a 10% correction from the highs.
The Dow tumbled by 697 to 41,938 as 26 of its 30 members were lower while the S&P got clobbered by 91 to 5827. The Nasdaq collapsed by 317 to 19,161 as the formerly leading tech giants came down sharply while the Russell 2000 Index of small stocks gave back a large 49 to 2189.
The VIX loved this negative stock action and rose to 19.54.
As far as the jobs report was concerned, the number rose by 256,000 which was around 100,000 more than expected while the unemployment rate eased back to 4.1%. Average hourly earnings gained by 0.03%, less than predicted.
STZ tumbled 17% for the biggest loss in the S&P after the seller of Modelo beer and Robert Mondavi wine reported weaker profit and revenue for the latest quarter than analysts expected. Its CEO said the company is seeing subdued spending from its customers, who are looking for better values.
Insurance companies were also under pressure as wildfires continue to burn in the Los Angeles area. Many of the homes that have been destroyed were in expensive areas where the typical price can top $3 million, and such high-priced damage could eat into insurers’ profit. ALL, TRV and CB, among others, sold off sharply.
DAL made a nice gain to a new high as it delivered a strong report for the last three months of 2024 than analysts expected. The airline said it is seeing strong demand for travel, which accelerated through the end of last year, and it expects that to continue into 2025.
In the bond market, the yield on the 10-year Treasury jumped to 4.76% from 4.68% late Thursday. In September, it was below 3.65%, marking a major move for the bond market.
The yield on the two-year Treasury, which moves more closely with expectations for what the Fed will do in the near term, climbed to 4.38% from 4.27% late Thursday.
Friday’s jobs report means traders see it as a near certainty that the Fed will not cut interest rates at its next meeting later this month. That would be the first time it has stood pat following three straight cuts to interest rates.
A growing minority of traders are now saying the Fed may not cut rates again at all in 2025.
As mentioned, this week is the start of the 4Q earnings season and is important to perhaps set the tone for what is coming; tonight – KBH; Wednesday – BLK, C, WFC and Dow components GS and JPM; Thursday – BAC, JBHT, MS and Dow component UNH; Friday – FAST, SLB and SST.
Economic reports will see: Tuesday – December PPI; Wednesday – December CPI; Thursday – December retail sales, weekly jobless claims; Friday – December housing starts, December capacity utilization and industrial production.
