Congress, PMI Data On Tap After 5-Day Stock Skid
Schwab Market Update Audio
Deep Dive
Why is the S&P 500 on a five-day losing streak?
The S&P 500 is on a five-day losing streak due to a combination of factors, including rising Treasury yields, a strong U.S. dollar hitting two-year highs, and surging crude oil prices. Additionally, encouraging jobless claims data caused Treasury yields to tick higher, which further pressured stocks. The index has struggled to maintain bullish momentum, with support at the 50-day simple moving average failing to hold in December.
What impact does a strong U.S. dollar have on the stock market?
A strong U.S. dollar can introduce volatility into the stock market, particularly for multinational companies, as it impacts their earnings. While a higher dollar isn't inherently bad, its rapid ascent can create uncertainty. This is because a strong dollar makes U.S. exports more expensive and reduces the value of overseas earnings when converted back to dollars.
What does the rise in the VIX indicate about market sentiment?
The rise in the VIX, which climbed 9% to test the pivotal 20 level before settling around 18, indicates increased market uncertainty. Volatility has been volatile itself lately, and VIX futures suggest that volatility may continue to rise in the coming months, reflecting investor nervousness about the market's direction.
What are the key factors driving crude oil prices higher?
Crude oil prices surged to two-month peaks due to U.S. economic strength, geopolitical factors such as the ongoing wars in Ukraine and the Middle East, and hopes for a recovery in China. These factors, along with some short covering, have supported oil prices despite expectations that supply growth will outpace demand growth in 2025.
What does the December ISM Manufacturing PMI data reveal about the U.S. economy?
The December ISM Manufacturing PMI is expected to come in at 48.5%, slightly up from 48.4% in November but still below the 50% threshold that indicates expansion. This suggests that the U.S. manufacturing sector remains weak, a trend that has persisted for over a year.
Why did Tesla's stock struggle despite a rebound in mega-cap stocks?
Tesla's stock struggled after reporting fourth-quarter deliveries of 495,000 vehicles, which fell short of Wall Street's expectation of 510,000. The company has faced challenges from cheap gasoline, competition from Chinese EV manufacturers, and the growing popularity of hybrid vehicles. These factors contributed to the pressure on Tesla and other mega-cap stocks.
What is the significance of the 10-year U.S. Treasury note yield rising to 4.58%?
The 10-year U.S. Treasury note yield rising to 4.58% reflects market expectations that the Federal Reserve may keep interest rates higher for longer. This rise in yields, combined with a strong dollar and rising oil prices, creates a challenging environment for stocks, as it increases borrowing costs and reduces the attractiveness of equities relative to bonds.
What are the potential implications of the new Congress being sworn in?
The swearing in of a new Congress and the election of a House speaker could introduce political uncertainty, which may exacerbate market volatility. Investors will be watching for any policy changes or gridlock that could impact economic growth, fiscal policy, or market sentiment.
- Five-day losing streak for S&P 500
- Stronger US dollar and rising oil prices
- Weakening bullish momentum, but technically still in an uptrend
Shownotes Transcript