Stock market holds steady as Wall Street responds to mixed earnings reports.
Today in the stock market, there seems to be a sense of stagnancy as major U.S. stock indexes like the S&P 500 and the Dow Jones Industrial Average are trading flat following a mixed bag of earnings reports from big companies such as Morgan Stanley and UnitedHealth Group. The S&P 500 managed to eke out a 0.1% gain at midday, while the Dow Jones was down by 0.1% and the Nasdaq composite index was also marginally lower.
Yesterday, the stock market saw a surge in prices, driven partly by optimism that a promising inflation report might prompt the Federal Reserve to consider lowering interest rates further in the coming year. However, today the market seems to be in a more tepid state as traders digest a series of economic reports that have presented a varied picture of economic conditions. Some reports, such as the growth in sales of U.S. retailers being weaker than anticipated, or an increase in unemployment benefit claims, may hint at some slowdown in the economy. On the flip side, manufacturing in the mid-Atlantic region surprisingly rebounded, showing signs of growth.
This mixed bag of economic reports seems to suggest that while the U.S. economy may not be heading into a recession, there are signs of moderation that could help alleviate concerns about inflation. Traders and investors have been on edge in recent weeks, as incoming economic data has forced them to reassess their expectations regarding the Federal Reserve’s monetary policy in 2025. When data points to lower inflationary pressures, hopes of interest rate cuts have been rekindled, leading to lower Treasury yields and higher stock prices. Conversely, any indications of persistent inflation concerns have pushed Treasury yields up and stock prices down.
Today, Treasury yields seem to be relatively stable, with the 10-year Treasury yield dipping to 4.62%, subdued from its recent higher levels. The short-term two-year Treasury yield, which closely mirrors market expectations for the Fed’s future moves, also pulled back from its recent highs. Although yields are still above their levels from last fall, the current levels are not extreme enough to substantially weigh down stock prices, especially if companies continue to deliver robust earnings growth.
In particular, Morgan Stanley saw its shares rise by 2.4% after reporting better-than-expected earnings for the last quarter. The bank’s CEO highlighted the strong performance of its investment banking segment, alongside solid growth in client assets within its wealth and investment management businesses. This positive performance builds on other strong earnings reports from banks like Citigroup, Goldman Sachs, and Wells Fargo earlier in the week.
Overall, the stock market appears to be in a phase of introspection, as traders and investors try to decipher the signals from the recent economic data releases. While the path ahead is uncertain, it seems that the market will continue to react to incoming data as it charts its course through 2025.
