Trending
Market Wrap
US Futures and oversea markets began the day playing out as everyone had envisioned, given Trump’s weekend tariff declarations. US markets opened also as expected up until Mexico’s president announced on “X” that a tacit agreement had been reached that involved Mexico bolstering its border with 10,000 officers and the US pledging to take steps to stem the flow of arms in to Mexico. Markets responded almost immediately, the S&P 500 gaining 0.83% in about five minutes, and aided by reports of a call between Trump and Trudeau helped the index rally 1.19% from intraday lows. It was only after the market close that it was confirmed that a 30-day hold on Canadian tariffs had materialized. There have been no announcements regarding progress on China tariffs.
While an overall meltdown was avoided, broad equity indexes ended the day lower across the board. The Dow declined 0.28%, the S&P 500 fell 0.76%, the Nasdaq Composite shed 1.20% and the Russell 2000 gave back 1.28%. Looking at the S&P 500, the advance/decline ratio was 180: 323 which points to a lower day but the Mag 7 subset of Apple (AAPL), Tesla (TSLA) and Nvidia (NVDA) contributed to just over 75% of the day’s result. Volatility responded as well, spiking to 20.24 intraday, settling down to 18.62 but still over 13% above the prior day’s close.
Given yesterday’s market action it shouldn’t be too much of a surprise that the majority of the Tematica Model Suite ended the day lower although Core Holdings and Digital Payments posted positive returns, as did Market Hedge. Looking at the entire list of Model Suite components we saw 65 names advancing and 128 names declining so while the overall trend was lower, from an advance/decline perspective, the model suite fared better than the S&P 500 for what its worth.
Tariffs? What Tariffs? Back to Regularly Scheduled Earnings.
Futures are mixed this morning with the Nasdaq mini just poking its nose above water after a strong beat and raise quarter from Palantir (PLTR)prompted a number of price target increases and is putting some life back into the AI trade.
On the earnings front, the focus will be on a few sectors. Alphabet (GOOG, GOOGL), Advanced Micro Devices (AMD) and Juniper Networks (JNPR)will give us some more insight into the state of AI. Pfizer (PFE), Amgen (AMGN) and Merck (MRK) will give us some color on the state of Big Pharma. Finally, we’ll get some insight into the state of the consumer as we hear from Pepsico (PEP), Chipotle (CMG), Estee Lauder (EL) and, for the well-heeled among us, Ferrari (RACE).
With the Mexico and Canada tariff situation now taken of the front burner, market participants can focus their attention on parsing the effect of tariffs on China, as well as regular economic releases and the balance of the Q1 earnings season. While not an imminent threat, Trump did mention that Europe is also in his tariff crosshairs, but we have yet to hear more on any plans he may have there.
Given yesterday’s tariff headlines, it was difficult to pay attention to regular way market news but it wasn’t lost on us that for the first time since October 2022, ISM’s Purchasing Managers Index (PMI) covering Manufacturing crossed above 50, pointing to expansion for US manufacturers. A quick reminder about the differences between the ISM and S&P Global/Markit PMI methodology is ISM is focused solely on US companies’ domestic activity while the Markit survey takes any non-US activity into account, so yesterday’s milestone was a win for US companies.
Today’s economic news includes an JOLTS Job Openings update for December and is expected to have dipped slightly below 8 million which would reverse the past couple of months of data but still leave the metric above the most recent September 2024 trough.
Overall, today seems like it will be back to business for markets. Not exactly a “buy the dip” scenario but at least North American tariffs are off the table for the next 30 days.
Related: Tariffs and Tunes: How Music Icons Relate to Trade Policies