January 17, 2025

After Thursday’s upside explosion, the indexes could not hold onto early nominal gains and just drifted lower as the afternoon unfolded.

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The Dow ended lower by 68 points to 43,153 as it was hurt badly by a large decline in AAPL, which suffered its worst one-day decline since back in August. It had been trending lower except for Thursday’s downside relief. In addition, other weak members included other technology former leaders such as AMZN, NVDA plus MCD and UNH which got sold off big-time after its earnings report in the morning.

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The S&P also followed the same pattern, with early nominal gains unable to hold and it fell apart at the end with a closing loss of 12 to 5927. And no surprise here, it was the tech leaders that did the market in as the overall majority of index members were actually up on the day, which once again shows the dominance of these members that they basically control what is going on in terms of the index averages.

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Because of this pattern, the Nasdaq did the worst with a closing decline of 172 down to 19,338 with TSLA also showing its recent weakness once again, while the Russell 2000 Index of small stocks squeaked out a 3 points closing gain to 2266 as it was the banks that did better.

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The VIX, which was lower in the morning on the overall advance, closed higher at 16.6 on the late market selloff.

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Treasury yields were also more placid in the bond market following mixed economic reports on Thursday. One report showed that retail sales growth for December was not as strong last month as economists expected. Another said more U.S. workers filed for weekly jobless claims last week, and a third said that manufacturing in the mid-Atlantic area unexpectedly roared back to growth (see below for details).

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Taken together, the trio of reports suggests the U.S. economy is nowhere near a recession but may be showing some signs of slowing that could keep pressure off inflation. Markets have been lurching down and up in recent weeks as economic reports make traders revamp their expectations about what the Federal Reserve may do with interest rates in 2025.

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When reports have calmed worries about inflation, expectations have climbed for possible cuts to rates. That has typically sent Treasury yields lower and stock prices higher. When inflation looks to be a bigger problem, whether through a still-solid economy or possible policies coming from the new President-elect, yields have climbed, and stock prices have tended to sink.

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On Thursday, yields eased modestly. The yield on the 10-year Treasury fell to 4.61% from 4.66% late Wednesday and from 4.79% on Tuesday.

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The two-year Treasury yield, which more closely follows expectations for the Fed’s upcoming moves, slipped to 4.23% from 4.27% late Wednesday and from 4.37% two days ago.

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Treasury yields are still higher than they were last autumn, though. And higher yields can put downward pressure on stock prices, unless companies deliver higher profits to make up for it.

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MS climbed 4% after reporting stronger earnings for the latest quarter than analysts expected. Its C.E.O. said that investment banking improved in the quarter. Strong financial markets also helped its total client assets grow to $7.9 trillion across its wealth and investment management businesses.

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It followed stronger-than-expected profit reports from a bevy of banks the day before, including C, GS and WFC.

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BAC also delivered a profit report on Thursday that beat expectations, but its stock ended lower while USB fell to one of the worst losses in the S&P 500 after reporting results for the latest quarter that fell short of analysts’ expectations. It dropped 5.6%.

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The only stock to lose more in the index was Dow component UNH, which tumbled by 6%. The insurer reported a stronger profit than expected, but its revenue for the latest quarter came up shy of forecasts. A rise in medical costs surprised analysts. It was the company’s first financial report since the shooting of one of its executives outside a New York City hotel early last month.

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Another weight on the market was TSLA, which fell on news it is offering discounts on its Cybertruck, the latest sign that the company is struggling to attract buyers as sales of its electric vehicle models drop for the first time in a dozen years.

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Taiwan computer chip maker TSM reported Thursday that its profit in the last quarter jumped 57%. The world’s biggest semiconductor manufacturer, which has found itself in the middle of a trade and technology rift between the U.S. and China, said its results were propelled by the AI boom.

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This week is the start of the 4Q earnings season and is important to perhaps set the tone for what is coming; yesterday – MS, TSM higher while BAC, USB lower in addition to Dow component UNH; today - JBHT, FAST and STT lower while SLB is higher.

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Economic reports will see: yesterday – December retail sales rose by 0.4% and ex-autos also up by 0.4%, weekly jobless claims rose to 217,000, Philadelphia Fed Manufacturing January Survey was ahead by a large 44.3, December import prices rose 0.1% and export prices were ahead by 0.3%; today – December housing starts rose to 1.5 million and building permits stayed at 1.48 million, December capacity utilization and industrial production.

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And again, the various stock index futures are higher before the opening, and will they keep pushing to the upside like on Wednesday, or will they fade out again like yesterday, so it would be nice if they can keep the gains especially in the former leading technology issues.