Key Takeaways
- Stocks Dip Slightly As Investors Await Inflation Report And Cabinet Nominations
- Chip Stocks Remain Weak Amid Uncertainty On Trump’s CHIPS Act Repeal
- Crypto Enthusiasm High; Bitcoin Hovers Near $90,000 As SEC Changes Expected
After a week that saw significant gains, stocks took a bit of a breather to start the week. On Tuesday, the S&P 500 and Nasdaq Composite fell fractionally. Small Cap stocks, which have had the biggest rally since the election, fell 1.8% and the Dow Jones Industrial Average dropped 0.9%. We’ll see what impact today’s latest report on inflation has, if any.
Equity volume for the day was a bit lighter than we’ve seen recently (though option volumes remained strong), and I think that probably lends some credence to the notion we saw a little bit of profit taking. There has been a lot of excitement over the prospect for deregulation in the next administration. But investors wanting more specific details are watching to see who President-elect Trump intends to nominate to his cabinet. Thus far, the positions for which a nominee has been announced have been mainly in areas of foreign relations and national security. With the exception of temporary roles for Elon Musk and Vivek Ramaswamy, who will look to cut down on wasteful spending, no other key economic advisors have been nominated. One of the people who has been nominated for a role is Marco Rubio for Secretary of State. Rubio is known as a China hawk and that may explain why on Tuesday, Chinese stocks fell over 3.5%.
An interesting sector that hasn’t performed all that well since the election is chip stocks. During the campaign, Trump discussed repealing the CHIPS Act. That talk has since subsided quite a bit and a full repeal is looking less likely. However, the sector as a whole still seems a bit in limbo and has already seen three consecutive down days, stocks like INTC and LAM having a tougher time.
There are a few companies on my radar today including Instacart (Maplebear). The company reported numbers before the open that beat on both revenue and earnings. However, lowered guidance sent the stock lower by nearly 10% in premarket. Spirit Airlines is on the cusp of filing for bankruptcy after merger negotiations with Frontier Airlines fell apart and that stock is down over 60% to under $1. Spotify shares are higher by 6% in the premarket following strong earnings. Then after the close today, Cisco Systems, which has seen a number of recent upgrades, will report. They will be followed tomorrow morning by Disney, who is scheduled to report before the open.
Perhaps the biggest winner in the market of late is crypto. Bitcoin, which broke $90 thousand on Monday, has pulled back slightly, but is still right around that level. Crypto enthusiasts are bullish on the sector and the anticipated leadership changes at the Securities and Exchange Commission. While it remains to be seen who will ultimately be nominated to lead the SEC, it’s assumed they will take a more favorable position when it comes to crypto.
For today, I’m interested how markets respond to the Consumer Price Index number. Both CPI and Core CPI, which strips out volatile sectors such as food an energy, came in as expected. As I’ve said in my last couple columns, I really don’t think the economic news will have as pronounced an impact on equity prices for the time being. Markets seem significantly more interested in policy issues and deregulation. However, I am continuing to watch the yield curve because that is where I think the economic data is being factored in longer-term. I’m also watching bitcoin to see if the enthusiasm can push prices to $100,000, which has been an often talked about price target for several years now by crypto bulls. As always, I would stick with your investing plans and long-term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.