U.S. stocks opened with modest gains on Tuesday evening, Beijing time. Retail sales in the U.S. for December unexpectedly stalled, indicating more cautious consumer spending towards the end of the year. Markets are awaiting the release of the U.S. January non-farm payrolls report scheduled for Wednesday.
The Dow Jones Industrial Average rose by 57.62 points, or 0.11%, to 50,193.49. The Nasdaq Composite increased by 24.743 points, or 0.11%, to 23,263.413. The S&P 500 gained 9.67 points, or 0.14%, reaching 6,974.49.
Technology stocks continued their rebound from Friday, boosting the broader market. Although a sell-off last week, driven by concerns related to software and tech giants, impacted the market, investors are hopeful that the upward trend can be sustained. Analysts noted that, from a technical perspective, the recent sell-off did not cause substantial damage to the market.
Strategists at JPMorgan stated that software stocks are poised to rebound from a historic decline, as the market's pricing of AI's short-term disruptive impact is unrealistic.
A team led by Dubravko Lakos-Bujas suggested that as "extreme price movements" create the potential for capital to rotate back into the sector, at least in the short term, investors should increase allocations to high-quality software stocks that are more resilient to AI disruption.
The team wrote in a report, "Given positioning clearance, excessive pessimism regarding AI's potential to disrupt the software industry, and solid fundamentals, we believe the risk-reward balance is increasingly tilted towards a rebound."
In fact, after briefly falling below its 50-day and 100-day moving averages last week, the S&P 500 has successfully reclaimed these key support levels. Furthermore, the performance of many asset classes has outperformed the index—a signal viewed as bullish by traders.
Sonali Basak, Chief Investment Strategist at iCapital, commented, "We do not believe this will be a smooth trading environment. The market will experience volatility and churn, requiring investors to be selective, but winners will still emerge during this process."
On the economic data front, U.S. retail sales for December unexpectedly stalled, indicating that consumers were more cautious with their spending at the year's end.
Data from the U.S. Commerce Department on Tuesday showed that seasonally adjusted retail sales were essentially flat in December, following a 0.6% increase in November. Sales excluding auto dealers and gasoline stations were also unchanged.
Among 13 retail categories, eight posted declines, including clothing stores and furniture stores. Sales at auto dealers also decreased. Conversely, spending increased at building materials stores and sporting goods retailers.
This data suggests that consumer spending momentum weakened as the holiday shopping season concluded. While many economists expect tax refunds to support demand early this year, households remain concerned about high living costs and persistent worries about the job market.
The breadth of consumer spending is also a concern. While wealth generated by stock market gains may stimulate demand, there are signs that discretionary spending among lower-income Americans, who rely primarily on modest wage growth, is less robust.
The release of the U.S. January non-farm payrolls report, delayed due to a brief budget dispute in Congress last week, is now scheduled for Wednesday.
This report will not only disclose the latest employment data for January but will also provide the final revised figures for total job additions throughout 2025. Markets are focused on its ability to accurately reflect the true state of the U.S. labor market.
Previously, the U.S. Bureau of Labor Statistics preliminarily indicated that job growth figures from April 2024 to March 2025 were overstated by 911,000. Market expectations are widely anticipating that the final revisions for the entirety of 2025 will reflect the actual impact of this overestimation.
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