The S&P 500 is up 1.2% in a broad-based advance, as investors digest observations that the U.S. could be getting closer to normalcy with less inflation pressures. The Nasdaq Composite (+1.7%) and Russell 2000 (+1.3%) are also up noticeably, while the Dow Jones Industrial (+0.7%) is up more modestly with a 0.7% gain.
Briefly, more U.S. states are relaxing mask mandates amid improving COVID-19 trends, and Dr. Fauci remarked that the U.S. is heading out of the “full blown” pandemic phase. These developments have benefited the cyclical stocks, but today is really a broad-based advance.
All 11 S&P 500 sectors trade higher with gains ranging from 0.1% (consumer staples) to 1.9% (materials and real estate). Advancing issues outpace declining issues by nearly a 4:1 margin at the NYSE.
On inflation, Atlanta Fed President Bostic (not an FOMC voter) told CNBC that there’s evidence that inflation isn’t getting worse. Cleveland Fed President Mester (FOMC voter) said in a speech that she expects inflation to moderate this year on the condition that the FOMC takes appropriate action, although she didn’t advocate for a 50-basis-point hike in March.
These comments have helped rein in the 10-yr yield, which is down three basis points to 1.92%. The 2-yr yield remains unchanged at 1.34% on continued expectations for five rate hikes this year, even though Mr. Bostic said he thinks the Fed will raise rates three or four times this year.
Separately, Chipotle Mexican (CMG 1604.39, +143.65, +9.8%), Lyft (LYFT 43.20, +2.00, +4.9%), and Enphase (ENPH 160.91, +16.41, +11.4%) are some of today’s earnings standouts.
Lyft provided downside Q1 revenue guidance due to the Omicron variant impacting January ride-share activity, but investors are forgiving the company amid the improved market perspective on COVID-19. CVS Health (CVS 104.94, -5.88, -5.3%) remains an earnings laggard, though, after reducing the low end of its FY22 cash flow from operations guidance.
While the market has struggled to build on it early gains, investors have at least been comforted that there hasn’t been a concerted effort to sell into the strength. This resilient price action could draw in sidelined investors, but we’ll see.
Reviewing today’s economic data:
- Wholesale inventories increased 2.2% m/m in December (Briefing.com consensus 2.0%) following a revised 1.7% increase (from 1.4%) in November.
- The weekly MBA Mortgage Applications Index fell 8.1% following a 12.0% increase in the prior week.