On 15 Jan, we saw the stock market rally experienced after December Consumer Price Index (CPI) report provide a favorable inflation data. Major U.S. equities indexes notched strong gains in the midweek trading session after several banks released upbeat earnings reports.
Favorable inflation helped to provide investors with indications of a cooldown in "core" inflation in December reinvigorated optimism that the Federal Reserve might implement additional interest-rate cuts in 2025.
The S&P 500 increased by 1.8%, trading above its 50-day moving average of 5,957 at its session high before closing just below this key technical level. The CPI report indicated a decrease in the year-over-year rate in core-CPI to 3.2% from 3.3%.
Outperformance among several financial sector components helped DJIA to go 1.65% higher, while the recalibrated rate-cut outlook buoyed the tech-heavy NASDAQ, which jumped 2.45%.
S&P 500 Ten Out Of Eleven Sectors in The Green, Consumer Discretionary Above 3%
The S&P 500 consumer discretionary sector increased by 3.02% to lead the group with help from Tesla (TSLA) 8.04% gain, communication services was up by 2.66% helped by Meta Platforms (META) and Alphabet (GOOGL) with more than 3% gains.
Information Technology sector was up by 2.22% which indicate a rebound in mega-cap stocks. We also saw broad-based buying interest in the stock market was supported by strong earnings results from major financial sector players, along with short-covering activity that spurred additional buying in the bond market.
JPMorgan Chase (JPM) rose by 2.0% and Citigroup (C) increased by 6.5%, both achieving new 52-week highs after surpassing earnings expectations. The S&P 500 financial sector saw a gain of 2.6% compared to the previous day's close.
Conversely, the defensive-oriented consumer staples sector slightly declined by 0.1%, and the health care sector edged up by 0.2%.
Note Yield Drop Responding To Inflation Data
The bond market responded to the inflation data with the 10-year yield, which is highly sensitive to inflation changes, decreasing by 14 basis points to 4.65%. The 2-year yield dropped ten basis points to 4.26%, and the 30-year bond yield fell 11 basis points to 4.88%, down from just below 5.00% the previous day.
Stocks To Watch
$Tesla Motors(TSLA)$ shares drove 8% higher, logging the strongest performance in the S&P 500, following reports of a strong first day of orders in China for the carmaker's updated Model Y electric vehicle (EV). The refreshed sport utility vehicle (SUV) is expected to become available in U.S. and European markets within several months. In addition, Morgan Stanley analysts predicted that Tesla stock could reach as high as $800 per share in the coming year.
Tesla have shown strength as the bulls have successfully defended the 26-EMA level and it is moving above the 12-EMA, so the next action we should be seeing is whether the bulls would succeed in making the daily uptrend expansion, if that happen, we could be seeing TSLA going to its previous highs of $480.
Bank of New York Mellon (BK) was among the financial firms that posted positive results, with gains in fee revenue and declines in non-interest expenses helping the bank top quarterly profit estimates. Although BNY's CEO highlighted uncertainties related to the incoming presidential administration's tariff proposals and the unclear prognosis for interest rates, he stressed the bank's positive momentum heading into 2025. Bank of New York Mellon shares also gained 8%, leading bank stocks to rise higher on Wednesday.
$Intuitive Surgical(ISRG)$ which added 7.7% after the medical technology firm released preliminary fourth-quarter results. Year-over-year sales growth of 25% exceeded consensus forecasts, and procedures performed using the company's da Vinci surgical platform jumped 18% from a year ago. Increases in procedures help Intuitive drive higher sales of its single-use instruments and accessories, but the company expects growth in worldwide procedures to decelerate slightly in 2025.
$Goldman Sachs(GS)$ saw a significant rise in its stock price, climbing by 6% as the Dow surged 703 points, or 1.7%, on Wednesday. This comes amidst discussions about the potential early termination of its credit-card partnership with $Apple(AAPL)$ before the contract's expiration in 2030. Goldman expects improvements in its metrics by 2025 and 2026, driven by the Apple Card's performance. The bank also reported strong Q4 and full-year earnings, supported by solid net interest income.
$Taiwan Semiconductor Manufacturing(TSM)$ is anticipated to report its largest profit jump since 2022, with analysts expecting earnings per share of $2.22 and revenue of $25.92 billion for Q4. The company saw a 39% year-over-year revenue growth in Q4 2024, driven by high demand for AI applications. Despite the positive outlook, analysts at Needham caution about near-term headwinds.
If we were to look at the technical for opportunities to buy into TSM, and we are seeing that TSM bulls have successfully defended the 26-EMA which is an important period, and it has done so even during the market correction on Monday (13 Jan) to 14 Jan, and now I am expecting the bulls to make an attempt for daily trend expansion.
This might be the time I will take another position in TSM (I have existing position in another broker).
EQT (EQT) and Devon Energy (DVN) rose by 3.2% and 3.7%, respectively, after Bernstein upgraded both stocks to Outperform. The firm sees an undersupplied natural gas market driving prices above $5/mcf, presenting a unique opportunity for long-term value creation. EQT's extreme leverage to natural gas prices and Devon's domestic focus were highlighted as key factors.
Summary
I think we might see the rally continued cautiously as we see smaller banks earnings and how Fed would react to the latest CPI data. We should be seeing market sentiment turning into positive bias, and there might be some interest coming back to the semiconductor and mega caps sector.
There will be earnings from these names at the end of January, so will this rally continue for another week?
Appreciate if you could share your thoughts in the comment section whether you think rally would continue today (16 Jan).
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
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