The stock market ended its five-week winning streak, with S&P 500, Dow Jones, and Nasdaq all closing lower. Inflation concerns rose as the higher-than-expected Producer Price Index reduced hopes for lower interest rates. Treasury yields rose to 4.28% as investors adjusted to expectations.
Despite the pullback, the earnings outlook remains positive, with the market near record highs. The S&P 500 fell 0.5%, the Dow Jones 0.4%, and the Nasdaq 0.8%. The 10-year the Volatility Index (VIX) increased slightly to 14.24, and the energy sector performed well, while communications and transportation lagged.
The stock market indices are trending higher despite concerns over interest rates due to strong earnings growth in the tech sector. However, the rally is narrowing, with only half of stocks in the S&P 500 rising this year and less than a third outperforming the index. There are also concerns about the sensitivity of interest rates and the underperformance of small-cap and transportation stocks.
Market trading does not appear to indicate an imminent reversal, as indicated by the low CBOE Volatility Index. Economic indicators such as consumer spending, nonresidential fixed investment, and government spending continue to support economic growth. Expectations may be elevated, as current levels of the Conference Board's Leading Economic Index are associated with recessions. Corporate earnings, labor growth, and labor productivity are key to maintaining a “soft landing”.
Today, market indices traded near three-year highs. The DJI closed at 37,683 and the SPX closing at 4,763 while the VIX closed lower at 13.08.
RiverTree opened two new positions, selling an ON 02/16/2024 -P and adding to the SHOP position with a 02/16/2024 -P. See Trade Log.
A strong US payroll report and wage gains lessen the chance of a Fed rate cut in March. Employment rose 216,00 in December and hourly earnings increased by .4 percent.
A new position was added to the portfolio today with the sale of a second Wells Fargo put, see Trade Log.