The S&P 500 gained 0.8% on Tuesday, as the market drifted higher while investors digested another increase in interest rates and individual storylines. The Dow Jones Industrial Average (+1.1%), Nasdaq Composite (+1.3%), and Russell 2000 (+1.6%) each outperformed the benchmark index.
Eight of the 11 S&P 500 sectors closed higher, including five that gained at least 1.0%. The materials sector (+1.6%) was the top-performer, and the heavily-weighted information technology sector (+1.3%) wasn’t too far behind.
The energy sector (-2.1%), on the other hand, declined 2% as oil prices fell below $90 per barrel ($89.43, -1.84, -2.0%) amid speculation that the U.S. could allow Iran to increase its oil exports. Reports indicated that U.S.-Iran nuclear talks have made progress.
Regarding interest rates, the 10-yr yield came within three basis points of the 2.00% level before settling at 1.95%, or four basis points above yesterday’s settlement. The 2-yr yield rose five basis points to 1.34% amid lingering expectations for five rate hikes this year. The U.S. Dollar Index increased 0.2% to 95.60.
Encouragingly, the higher rates benefited the financials sector (+1.4%) without hurting the growth stocks. The Russell 3000 Growth Index rose 1.1%, besting the 0.7% gain in the Russell 3000 Value Index. For what it’s worth, the S&P 500 closed essentially at yesterday’s high (4521.86).
Amgen (AMGN 241.01, +17.48, +7.8%), meanwhile, rose 8% after the Dow component reported better-than-expected earnings results along with encouraging EPS guidance. Pfizer (PFE 51.70, -1.51, -2.8%) fell 3% after issuing disappointing full-year guidance.
Peloton (PTON 37.27, +7.52, +25.3%) also reported downside guidance in addition to below-consensus fiscal Q2 results, but shares jumped 25% after the company announced a CEO change and cost-cutting measures. Shareholders were hopeful that the company could turn itself around or at least put itself in a more valuable position for a takeover.
In M&A news, Mandiant (MNDT 17.75, +2.69, +17.9%) spiked 18% after Bloomberg reported that Microsoft (MSFT 304.56, +3.61, +1.2%) might bid for the company. NVIDIA (NVDA 251.08, +3.80, +1.5%) officially terminated its acquisition of Arm Holdings.
Reviewing Tuesday’s economic data:
- The December Trade Balance Report showed a widening in the trade deficit to $80.7 billion (Briefing.com consensus -$79.6 billion) from an upwardly revised $79.3 billion (from -$80.2 billion) in November. December exports were $3.4 billion more than November exports while December imports were $4.8 million more than November imports.
- The key takeaway from the report is that the Omicron variant didn’t seriously disrupt trade activity in December, although there were signs of a slowdown in China as U.S. goods exports there decreased by $2.2 billion.
- The NFIB Small Business Optimism Index for January decreased to 97.1 from 98.9 in December.
Looking ahead, investors will receive Wholesale Inventories for December and the weekly MBA Mortgage Applications Index on Wednesday.
- Dow Jones Industrial Average -2.4% YTD
- S&P 500 -5.1% YTD
- Russell 2000 -8.9% YTD
- Nasdaq Composite -9.3% YTD
Overseas:
- Europe: DAX +0.2%, FTSE -0.1%, CAC +0.3%
- Asia: Nikkei +0.1%, Hang Seng -1.0%, Shanghai +0.7%
Commodities:
- Crude Oil -2.05@ 89.32
- Nat Gas -0.02 @ 4.23
- Gold +7.60 @ 1829.06
- Silver +0.18 @ 23.25
- Copper -0.01 @ 4.47