U.S. Markets End Lower Amid Mixed Signals
U.S. equity markets closed slightly lower on Thursday as investors assessed retail sales data and corporate earnings. December retail sales increased by 0.4%, while control-group sales rose by a solid 0.7%, highlighting steady consumer spending momentum. Financial institutions, including Bank of America and Morgan Stanley, delivered better-than-expected fourth-quarter earnings. These results followed strong performances earlier in the week from JPMorgan, Goldman Sachs, Citigroup, and Wells Fargo, driving the S&P 500’s financials sector to a weekly gain exceeding 5%.
Despite these gains, the broader market indices declined. The S&P 500 and Dow Jones Industrial Average each fell 0.2%, while the Nasdaq Composite lost 0.9%, weighed down by weakness in technology stocks. Mid-cap equities outperformed, with the Russell Mid-Cap Index advancing nearly 1%. Meanwhile, bond yields fell, with the 10-year Treasury yield settling at 4.62%.
Key Corporate Highlights
- UnitedHealth Group shares declined 6% after falling short of revenue expectations, despite showing annual growth.
- Morgan Stanley shares gained 4% on strong earnings driven by solid investment banking performance.
- Bank of America reported strong results, though its shares dipped slightly.
In commodities, West Texas Intermediate (WTI) crude oil fell 1.8% to $78.63 per barrel, while gold gained 1%, closing at $2,745.20 per troy ounce.
Economic data painted a mixed picture. U.S. homebuilder confidence rose unexpectedly, manufacturing activity in the Mid-Atlantic hit multi-year highs, and unemployment claims offered mixed signals. The Federal Reserve is expected to hold interest rates steady, with the potential for rate cuts in 2025 if inflation continues to moderate.
Global Market and Economic Insights
Asian Markets
Most Asian markets advanced on Friday, buoyed by strong Chinese economic data. However, Japan’s Nikkei 225 declined on expectations of an interest rate hike by the Bank of Japan. Elsewhere, equities in the Philippines and Indonesia rose, while India’s Nifty 50 and South Korea’s KOSPI fell.
European Markets
European shares rose nearly 1% on Thursday, bolstered by strong earnings from Richemont and gains in semiconductor stocks after TSMC’s record profit announcement. Luxury brands, including Richemont and LVMH, outperformed, while the tech index gained momentum following positive chipmaker results and expectations of further interest rate cuts in Europe.
U.S. Dollar and Treasury Yields
The dollar index fell below 109 on Friday, marking its first weekly decline in seven weeks. This weakness was driven by growing expectations of Federal Reserve rate cuts. Against the euro, the dollar traded at 1.0298, as speculation around a potential Bank of Japan rate hike also contributed to its decline.
The 10-year U.S. Treasury yield dropped to around 4.61% on Friday, recording its largest weekly decline since late November, following softer-than-expected U.S. inflation data. Markets are pricing in 41 basis points of Federal Reserve rate cuts this year, though the central bank is expected to keep rates steady in the near term.
Key Commodities Update
Oil prices edged slightly higher on Friday, with Brent crude trading at $81.63 per barrel and WTI crude at $78.24 per barrel. Strong Chinese economic data supported demand optimism, though gains were tempered by easing tensions in the Middle East and expectations of a Houthi ceasefire. Additionally, U.S. sanctions on Russian oil exports provided upward pressure on prices.
U.S. Retail Sales and Economic Growth
December retail sales rose by 0.4%, with notable strength in furniture, home, and sporting goods categories. Control-group sales exceeded expectations with a 0.7% rise. Consumer spending continues to be supported by robust household finances, a strong labor market, and moderating inflation, serving as a key driver of U.S. economic growth.
Equities on the Move
- Rio Tinto and Glencore reportedly engaged in discussions about a potential merger to combine their copper production and challenge BHP. However, market and regulatory hurdles may complicate the deal.
- BP announced plans to cut 4,700 jobs and 3,000 contractor positions as part of its cost-reduction strategy, aiming to save $2 billion by 2026.
- Target raised its holiday-quarter sales forecast due to strong demand for clothing, toys, and beauty products, though concerns about profit margins led to a nearly 1% dip in shares.
- Taiwan Semiconductor Manufacturing Co. (TSMC) reported record quarterly profit, with a 57% increase in net income driven by AI chip demand. Despite challenges from U.S. export restrictions and political uncertainty, TSMC remains optimistic about future revenue growth.
- Richemont recorded a 10% year-on-year increase in sales, exceeding expectations, with strong performance in the Americas and Europe.
Upcoming Data and Events
Today, the U.S. will release key economic indicators, including building permits, housing starts, and industrial production, offering insights into the housing market and overall industrial activity.
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