S&P 500, Nasdaq Dip as Economic Data and Earnings Take Center Stage
Overview of Market Movements
– The S&P 500 and Nasdaq closed lower on Tuesday, while the Dow enjoyed its third consecutive record close. This divergence followed disappointing retail sales data and anticipation of an important labor market report.
– The S&P 500’s communication services sector emerged as the weakest performer, largely affected by a 1.8% drop in Alphabet shares following the announcement of a $20 billion bond sale.
Impact of Economic Data on Market Sentiment
– Retail sales in the U.S. unexpectedly stalled in December, with a decline in spending on vehicles and big-ticket items. This minimal growth contrasted sharply with economists’ projections of a 0.4% rise, hinting at a slower trajectory for consumer spending and overall economic growth in the new year.
– Trader sentiment slightly improved regarding a more dovish Federal Reserve, with the likelihood of an April rate cut rising to 36.9%, up from 32.2% the previous day, as per CME Group’s FedWatch tool. Nevertheless, many anticipate that rates will remain unchanged until June, especially with President Trump’s nominee, Kevin Warsh, awaiting Senate confirmation.
Sector Performances
– Top Gainers in the S&P 500:
– Datadog: $129.67 (up 13.74%)
– Masco: $77.82 (up 8.67%)
– Marriott International: $359.35 (up 8.50%)
– Hasbro: $104.00 (up 7.48%)
– Top Losers in the S&P 500:
– Becton Dickinson: $171.68 (down 17.22%)
– S&P Global: $401.08 (down 9.71%)
– Raymond James Financial: $158.48 (down 8.75%)
– Incyte: $100.05 (down 8.24%)
Mark Luschini, Chief Investment Strategist at Janney Montgomery Scott, characterized the disappointing retail data as “bad news is good news,” especially for rate-sensitive sectors like utilities and real estate that were among the benchmark’s top gainers. However, Luschini noted caution ahead of the anticipated nonfarm payrolls report due Wednesday, stating, “In anticipation of the jobs report, nobody wants to exceed their risk thresholds in case of unsettling numbers.”
Economic advisor Kevin Hassett had cautioned that job gains might decline in the coming months due to a slower labor force growth and heightened productivity driven by AI advancements.
Market Indicators
– The Dow Jones Industrial Average rose by 52.27 points (0.10%) to 50,188.14 after reaching an intraday record high.
– The S&P 500 dipped 23.01 points (0.33%) to 6,941.81, while the Nasdaq Composite fell 136.20 points (0.59%) to 23,102.47.
Luschini remarked on the hesitation of the S&P 500 to breach its late January record close, emphasizing the contention that often accompanies such attempts.
The Dow’s rise was bolstered by gains in significant stocks like Walt Disney and Home Depot, which rose more than 2%. This was countered by declines in stocks such as Coca-Cola, which finished down 1.5% after reporting fourth-quarter revenue below expectations.
In the consumer discretionary sector, Marriott’s shares jumped 8.5%, reaching their largest daily gain since April, fueled by a projected 35% increase in co-branded credit card fees as luxury travelers continue to indulge in high-end vacations.
Spotlight shifts to S&P Global, which sank 9.7%, marking the largest decline in the S&P 500 after forecasting profits below analyst estimates for 2026. The audio streaming platform, Spotify, performed well, soaring 14.7% on strong first-quarter earnings forecasts, driven by robust user growth and price increases.
Closing Market Sentiments
– Advancing issues outnumbered decliners by a ratio of 1.47-to-1 on the NYSE, with 795 new highs against 65 new lows. In contrast, the Nasdaq saw 2,276 stocks rise but 2,447 fall, resulting in a ratio of 1.08-to-1 favoring declines.
– The S&P 500 recorded 72 new 52-week highs and 11 new lows, while the Nasdaq Composite reported 105 new highs and 107 new lows.
– Trading volume on U.S. exchanges reached 17.89 billion shares, slightly below the 20.68 billion-share average of the past 20 sessions.
In this complex market landscape, the S&P 500 and Nasdaq continue to navigate factors influencing investor sentiment, with economic data and earnings front and center. As these indices adjust to shifting economic landscapes, market participants remain vigilant, ready to adapt to emerging trends and developments.