Stocks close lower Wednesday
U.S. stocks ended Wednesday’s trading session in the red.
The Dow Jones Industrial Average lost 94.45 points, or 0.25%.
The S&P 500 dropped 0.56%, and the Nasdaq Composite fell 0.59%.
— Hakyung Kim
Health care and REITs are outperforming in early 2024, Strategas says
To find the pockets of stock market strength in the early going in 2024 look no further than health care companies and financials broadly, and real estate investment trusts specifically, Strategas technical analyst Chris Verrone told clients in a note early Wednesday.
As of Tuesday’s stock market close, the percentage of health care stocks in an uptrend climbed to the mid-50% area “from the mid-20s%” very quickly, Verrone noted, adding that healthcare performance is firming “under the surface,” and still “supported by a very contrarian flow backdrop.” The S&P 500 Healthcare Index is 2% higher for the year thus far in late day trading Wednesday, the best of the S&P’s 11 sectors.
REITs are doing the same in terms of “underlying strength…with nearly 70% of issues in an uptrend (the sector’s strongest reading in close to two years),” Strategas told clients. “REITs are consolidating after breaking out from a 2-year downtrend, with improvement under the surface as well.”
Vanguard Real Estate ETF over past 3 months.
Oil prices mixed as investors weigh China growth against OPEC demand outlook
Oil prices were mixed on Wednesday as investors weighed disappointing economic growth in China against a strong demand outlook from OPEC.
The West Texas Intermediate futures contract for February gained 16 cents, or .22%, to settle at $72.56 a barrel. The Brent futures contract for March lost 41 cents, or .52%, to settle at $77.88 a barrel.
Oil prices lost more than 2% earlier in the trading session after fourth-quarter economic growth in China missed expectations, raising worries about oil demand.
The two benchmarks recovered some of those losses as OPEC forecast robust oil demand growth in 2025 of 1.8 million barrels per day. The group expects oil demand to grow by 2.25 million barrels per day this year.
Supply and demand dynamics have largely overshadowed fears that mounting tensions in the Middle East could disrupt the market.
— Spencer Kimball
Miners continue to pull back after bitcoin ETFs launch, bitcoin ticks lower
Bitcoin mining stocks were lower as the price of the cryptocurrency remained in the red on Wednesday.
Riot Platforms and CleanSpark were each down 3%, while Iris Energy and Marathon Digital fell 2% each. Bitcoin traded slightly under the flat line.
Mining stocks have long traded in tandem with bitcoin, with investors previously using them to gain exposure to the cryptocurrency’s price. Now, following the launch of bitcoin ETFs last week, traders appear to be rotating out of miners and into the bitcoin ETFs themselves.
“Price has effectively been flat since the launch of the ETFs as capital is shuffling between various investment products investors have used and are using to gain exposure to bitcoin,” Sam Callahan, analyst at bitcoin services firm Swan Bitcoin, told CNBC. “Over the long term, these ETFs will reduce the barrier to entry to bitcoin in a year where the Fed is expected to return to more accommodative monetary policy and bitcoin’s issuance rate will be cut in half” – which should benefit the price this year.
— Tanaya Macheel
Fed unlikely to cut rates in March, according to strategist
While traders remain hopeful that the Federal Reserve will cut rates in March, Verdence Capital chief investment officer Megan Horneman believes rates my not be lowered until the second half of 2024.
“Right now, looking at the economy, there’s really no need for them to cut rates right now,” Horneman said.
“Cutting interest rates when you have employment that’s pretty low and a consumer who’s still spending could ‘re-inflate’ inflation, and that’s a concern I think the Fed has,” Horneman added.
— Hakyung Kim
Economic activity, inflation flat since late November, Fed report notes
Economic activity over the past seven weeks has been largely stagnant, with both hiring and prices rising at a “modest to moderate” pace, according to the Federal Reserve’s Beige Book report released Wednesday.
The summary of conditions across the Fed’s 12 districts found economic activity to be “relatively unchanged” since the last report on Nov. 29, 2023. From a sector standpoint, housing weakened as did the demand for mortgages amid elevated interest rates.
Companies reported that inflation weighed on consumer activity and noted difficulty in pricing power. Still, they said noted that wage pressures “remain elevated.”
—Jeff Cox
Insurance stocks hit new highs
Major insurance stocks were among the names trading at new highs on Wednesday.
Allstate, Chubb, Travelers and Progressive all hit new intraday all-time highs on Wednesday morning. Hilton and Visa also hit all-time highs, while Domino’s Pizza was trading at its highest point since March 2022.
Some other names hitting new highs include:
- CBOE Holdings trading at all-time high levels back to its IPO in June, 2010
- Fiserv trading at all-time high levels since its IPO in Sep, 1986
- Loews trading at all-time highs back through our history to 1972
Meanwhile, Archer-Daniels-Midland, Exxon Mobil and Pinnacle West Capital were all trading at their lowest level since 2022, while Devon Energy hit its lowest point since 2021.
— Jesse Pound, Christopher Hayes
Stocks making the biggest midday moves: Instacart, Spirit Airlines and more
These are the stocks moving the most in midday trading:
- Spirit Airlines, JetBlue Airways — The airline stocks respectively slid 22% and 8% a day after a federal judge blocked JetBlue’s proposed $3.8 billion acquisition of Spirit.
- Instacart — Shares of the food delivery service popped 8% on Wednesday after Wolfe Research upgraded shares to outperform from peer perform.
- Marathon Digital — The crypto mining firm slid 3% during Wednesday’s trading session. Earlier in the morning, the company received an upgrade to buy from BTIG.
Read the full list of stocks moving here.
— Lisa Kailai Han
Oil falls after China economic growth disappoints
Oil prices fell on Wednesday after economic growth in China missed expectations.
The West Texas Intermediate futures contract for February declined 54 cents, or .75%, to trade at $71.86 a barrel. The Brent futures contract for March lost 97 cents, or 1.24%, to trade at $77.32 a barrel.
China’s gross domestic product grew by 5.2% in the fourth quarter compared to the year prior, falling short of 5.3% growth forecast in a Reuters poll. Slower economic growth in China is raising concerns about oil demand in the world’s second-largest economy.
Worries about China’s economy combined with historic levels of oil production in the U.S. continue remain the main focus of investors, largely overshadowing geopolitical tensions in the Middle East.
— Spencer Kimball
Major indexes slide in 2024 after strong finish to last year
The new year hasn’t been so hot for stocks.
With 10 sessions completed in 2024’s trading year, the three major indexes are on pace for losses. The Dow and S&P 500 have slid 0.9% and 0.5%, respectively, since 2024 began, while the Nasdaq Composite has dropped 1.3%.
That marks a turn from the rally seen into the end of 2023. The Dow and S&P 500 finished last year up by more than 13% and 24%, respectively. The technology-heavy Nasdaq soared more than 43%.
The three major indexes since the start of 2023
— Alex Harring
BTIG’s Krinsky says keep an eye on Apple and Nvidia
Keep an eye on technology juggernauts Apple and Nvidia, according to BTIG’s Jonathan Krinsky.
“The two most important names to watch right now are probably Apple (AAPL, Not Rated), which is testing its 200 DMA (180.90) for the second time in a few weeks, and Nvidia (NVDA, Not Rated), which was up ~18% over the last 8 sessions as semis remain the hot momentum trade,” the chief market technician said in a Wednesday note.
Apple is also retesting $180, which represented a key resistance level for the iPhone maker for toward the end of 2021 and 2022, Krinsky added.
“How these names react in the coming days likely will be very telling for the overall market,” he wrote.
Apple shares have fallen 5.6% year to date, while Nvidia’s added 12.7%. Both stocks declined nearly 1% during Wednesday’s session.
— Samantha Subin
Real estate drags S&P 500
Real estate stocks were the biggest laggards in the S&P 500 on Wednesday, dragging the sector down 1.2%.
Boston properties was the biggest loser in the sector, last down nearly 3%, Prologis, Healthpeak Properties and Equinix declined more than 1% each.
Communication services, information technology and consumer discretionary also lagged, falling nearly 1% each. Semiconductor stocks On Semiconductor, NXP Semiconductors and Jabil fell about 3% each, while Enphase Energy and Fortinet lost 3%.
Popular media and major technology stocks pressured communications services, with Match Group down 2.3%. Walt Disney, Alphabet, and Take-Two Interactive lost at least 1%.
Elsewhere, Tesla, Ford Motor, Las Vegas Sands and Wynn Resorts fell at least 2% each, weighing on consumer discretionary.
— Samantha Subin
Large caps are taking the market reins back
Small-cap stocks underwent a resurgence towards the end of last year, but they’ve sunk into the red this month, taking a seat behind large caps.
Looking at a weighted ratio chart of the S&P 100 and S&P 600 indexes, LPL Financial chief technical strategist noted that a rising ratio between the indexes is pointing to large-cap outperformance.
“After a sizable pullback from October to December — that included several support violations — the weighted and equal-weighted OEX vs. SML ratio charts are back above their uptrends and rising 200-day moving averages, implying large caps have once again recaptured the leadership reins,” Turnquist said. “On the valuation side, smaller caps remain cheap, but value has mostly been out of favor compared to quality and growth, which is where larger caps are more tilted toward.”
So far this month, the Russell 2000 index of small-cap companies has dropped 5.8%, while the S&P Small Cap 600 index has lost 5.6%. The S&P 500 benchmark stock index, in comparison, has shed 0.7%.
— Pia Singh
Federal Reserve’s rate cuts will be ‘later and fewer,’ strategist says
A stronger-than-expected retail sales report adds to the notion the Federal Reserve will wait later in the year to start lowering interest rates, and make fewer cuts than markets are currently pricing in.
“It would be later and fewer is the mantra,” Sam Stovall, chief investment strategist at CFRA Research, told CNBC’s “Squawk on the Street” on Wednesday. “We’ve been saying that, essentially, the Fed would start to cut interest rates in May of this year, and then actually cut by 25 basis points in each of the final three quarters of this year.”
Investors have been trying to ascertain how a data-dependent Fed will proceed to lower rates in 2024. Currently, markets are pricing in six quarter-percentage point rate cuts this year, more than the three rate cuts policymakers indicated last month.
But a more moderate schedule would be an encouraging sign, Stovall said. The strategist expects later and fewer rate cuts would be indicative of a soft landing for the economy.
“If we did indeed get rate cuts to start sooner and to have more aggressive rate cutting schedule, I think that would imply that there are real problems with the economy,” Stovall said.
— Sarah Min
Strong retail sales data is not a green light for lower rates, analysts say
Retail sales topped expectations, increasing 0.6% in December while economists expected a rise of 0.4%. Sales were driven by a pickup in clothing and accessory stores, as well as online nonstore businesses, indicating a resilient consumer.
Here’s what analysts think the data means for the broader economy:
- Ted Rossman, senior industry analyst at Bankrate: “Consumer spending was remarkably strong during the holidays, continuing a year-long trend. I do worry, however, how people are paying for all of this stuff. Credit card balances and rates were already at record highs even before the holiday splurge…Inflation continues to weigh on Americans’ psyches, but reality looks a lot better than psychology. This doesn’t seem like an economy that needs to be stimulated by lower rates at the moment.”
- Quincy Krosby, chief global strategist at LPL Financial: “December retail sales reflect an economy that, although slowing, continues to be underpinned by consumer spending…For the Federal Reserve, slower consumer demand would help propel inflation to decelerate at a faster pace, however with consumer confidence gaining momentum, the economic landscape remains on solid ground.”
- Larry Tentarelli, chief technical strategist and founder of Blue Chip Daily Trend Report: “The U.S. consumer continues to hold up well, which is a positive for the economy. The stronger data does decrease Fed rate cut expectations…We continue to believe that a strong consumer is a net positive for markets.”
— Pia Singh
Traders lower expectations for March rate cut following retail report
Traders are growing less confident that the Federal Reserve will start lowering interest rates in March.
Odds that a the first rate will come at the March 19-20 meeting fell below 60% on Wednesday morning, following stronger-than-expected retail sales data for December. That’s considered an important level for Fed policymakers, who decide based on data but follow market expectations as well.
Chances for a March cut declined 59.1% heading into the stock market open, down about 10 percentage points from recent levels, according to CME Group data. Traders, however, still expect six rate cuts for the year.
—Jeff Cox
Boeing shares jump more than 2%
Boeing shares added 2.1% on Wednesday after the U.S. Federal Aviation Administration announced that it completed the inspections for the first group of Boeing 737 Max 9 planes.
The aircraft manufacturer has suffered heavy losses following the grounding of its 737 Max 9 planes in the U.S. after a midflight accident on an Alaska Airlines flight on Jan. 5.
To be sure, shares remain down nearly 22% month to date.
Boeing shares
— Hakyung Kim
Stocks open lower Wednesday
U.S. stocks began Wednesday’s trading sessions in the red.
The Dow Jones Industrial Average slipped 152 points, or 0.4%. The S&P 500 and Nasdaq Composite lost 0.7% and 1%, respectively.
— Hakyung Kim
Fed’s Bowman sees room for compromise on new banking rules
Federal Reserve Governor Michelle Bowman said Wednesday she is hopeful that compromises can be made on controversial new banking regulations set to take effect later this year.
“As I consider next steps, I am cautiously optimistic that policymakers can work toward a reasonable compromise, one that addresses two of the most critical shortcomings of the proposal: over-calibration and the lack of regulatory tailoring,” Bowman said of looming changes in what are known as “Basel endgame” rules.
The proposals would raise capital requirements and significantly change the regulatory landscape for large banks in particular but also some regional institutions. Compliance is set to start in July 2025, with a multiyear phase-in. Some Wall Street banks have threatened to sue to keep the regulations from taking place.
“Public feedback has also assisted in identifying the aspects of the proposal that result in the most severe unintended consequences. In my mind, it will be necessary for policymakers to modify the proposal to mitigate these issues and concerns as we move forward,” Bowman added.
—Jeff Cox
Charles Schwab shares drop on fourth-quarter revenue decline
Shares of Charles Schwab slipped nearly 1% in premarket trading Wednesday after the firm reported fourth-quarter earnings. Profits for the quarterly period was significantly lower, but beat analysts’ expectations.
Fourth-quarter earnings came out at 68 cents per share, excluding items, while analysts polled by FactSet forecasted 64 cents per share. Quarterly revenue was $4.46 billion for the period, falling slightly short of the $4.49 billion expected by analysts.
The firm’s net income for the quarter dropped to $1 billion from $2 billion for the same period a year ago. Net income for the twelve months ending on Dec. 31 was $5.1 billion, the press release said, compared with $7.2 billion for the year-earlier period.
The stock has lost more than 6.5% so far this year.
— Pia Singh
See the stocks making the biggest premarket moves
These are some of the stocks making notable moves before the bell:
- Sinclair — The broadcaster advanced 5.2% after announcing the settlement of all litigation related to Diamond Sports Group.
- SolarEdge Technologies — The solar stock fell 5% following a downgrade by Barclays to underweight from equal weight.
- Interactive Brokers — Shares slipped 3% after the electronic broker missed Street expectations for earnings per share in the fourth quarter.
— Alex Harring
David Rubenstein says it’s difficult to cut rates in the middle of a presidential election
David Rubenstein, Co-Founder & Co-Chairman The Carlyle Group, speaking on CNBC’s Squawk Box at the World Economic Forum Annual Meeting in Davos, Switzerland on Jan. 17th, 2024.
Adam Galici | CNBC
David Rubenstein, The Carlyle Group co-founder and co-chairman, believes that the Federal Reserve will have a difficult job cutting interest rates in the middle of a presidential election to maintain its political independence.
“it’s very difficult to cut rates when you’re right in the middle of a presidential election season, because the party that’s out of power will say, ‘well, you’re trying to help the party in power,'” Rubenstein said on CNBC’s “Squawk Box” at the World Economic Forum in Davos, Switzerland.
Market pricing Tuesday morning indicated about a 67% chance the FOMC will begin cutting in March, according to the CME Group’s FedWatch measure. Traders have priced in six rate cuts for 2024.
“Now, Jay Powell is Republican, presumably is not trying to help Biden but he’s trying to do what’s right for the country,” Rubenstein said. “So if he starts cutting rates significantly, in September, October, November, or before the election… People will say, ‘well, you’re helping the Democrats.'”
— Yun Li
U.S.-listed China companies under pressure
U.S.-listed shares of Chinese companies fell Wednesday following the release of weaker-than-expected GDP data out of China.
Shares of JD.com and PDD were down more than 4% each in the premarket. Alibaba lost 3.3%. The iShares China Large Cap ETF (FXI) was also down 3.1%.
— Fred Imbert
UK inflation rate surprises with rise to 4%, led by alcohol and tobacco
Andresr | E+ | Getty Images
U.K. inflation unexpectedly nudged upwards to 4% year-on-year in December, fueled by a rise in alcohol and tobacco prices.
Economists polled by Reuters had expected a modest decline in the annual headline CPI to 3.8%, after November’s sharper-than-expected fall to 3.9%.
The closely watched core CPI figure — which excludes volatile food, energy, alcohol and tobacco prices — came in at an annual 5.1%, above a 4.9% Reuters forecast and unchanged from November.
“As we have seen in the U.S., France and Germany, inflation does not fall in a straight line, but our plan is working and we should stick to it,” British Finance Minister Jeremy Hunt said in a statement.
– Elliot Smith
China reports fourth-quarter GDP miss as retail sales disappoint in December
China reported fourth-quarter GDP figures slightly below expectations, bringing 2023 growth to 5.2%.
The country’s economy grew 5.2% in the October to December quarter, China’s National Bureau of Statistics said Wednesday. That’s below expectations of a 5.3% growth forecast by economists in a Reuters poll.
China’s statistics bureau said the unemployment rate in cities in December was 5.1%, while that for people ages 16 to 24 remained far higher at 14.9%.
The bureau had in the summer temporarily suspended the release of the younger age group’s unemployment rate, citing the need to reassess calculation methods. That unemployment rate had previously climbed to records above 20%.
Read the full story here.
— Evelyn Cheng
Hong Kong shares tumble over 2%, led by real estate stocks
Hong Kong’s Hang Seng was the worst-performing index for a second straight day in Asia, falling 2.76% as real estate and consumer non-cyclical stocks declined.
Chinese tech giant Alibaba’s subsidiary Alibaba Health Information Technology, which plunged 7.43%, was the biggest loser on the HSI.
It was followed by residential property manager Longfor Group and tech heavyweight Meituan, which shed 5.68% and 5.48%, respectively.
— Lim Hui Jie
Business sentiment at large Japanese companies dip
Business sentiment at big Japanese manufacturers slid in January for the first time in four months, according to the monthly Reuters Tankan survey.
The sentiment index for manufacturers stood at +6, down from +12 six points in December, while the service-sector index grew to +29 in January from +26 in the previous month.
The monthly poll by Reuters tracks the Bank of Japan’s key tankan quarterly survey, and is calculated by subtracting the percentage of pessimistic respondents from optimistic ones. A positive figure means optimists outnumber pessimists, and vice versa.
Reuters said the poll underscored concerns about weak external demand, especially from China.
— Lim Hui Jie
Market is overvalued by 9% to 10%, says NYU’s Damodaran
The market looks overvalued by about 9% to 10%, according to Aswath Damodaran.
“The expectation game has turned against the market,” the professor at New York University’s Stern School of Business told CNBC’s “Closing Bell” on Tuesday.
Markets shocked investors in 2023, defying expectations for another rough year. Now, he fears that the market’s “turned too much in the other direction,” believing that inflation’s under control and the economy’s skirted a recession.
“This year, good news is going to require a lot more than it did last year and that too me is why I think stocks are in a dangerous place right now,” he said.
— Samantha Subin
Interactive Brokers falls on mixed earnings
Shares of Interactive Brokers slumped nearly 3% after posting mixed quarterly results.
Revenues came in at $1.15 billion and slightly ahead of the $1.14 billion expected, according to LSEG. However, the firm posted earnings of $1.52 per share, falling short of the $1.55 expected.
Interactive Brokers said that options volumes were up 21% and customer accounts rose 23% year over year, but equities volumes declined 22%.
Interactive Brokers falls after earnings
— Samantha Subin
Stock futures open flat
Stock futures opened flat on Tuesday evening.
S&P 500 futures and Nasdaq-100 futures were little changed. Futures tied to the Dow Jones Industrial Average inched down 17 points.
— Samantha Subin
