U.S. stocks climbed higher during Tuesday's early session, with the Dow Jones Industrial Average reaching a new intraday peak. This upward movement occurred despite data showing U.S. retail sales unexpectedly stalled in December, suggesting more cautious consumer spending at year-end. Market participants are awaiting the release of the U.S. January non-farm payrolls report scheduled for Wednesday.
The Dow Jones Industrial Average rose by 364.84 points, or 0.73%, to 50,500.71. The Nasdaq Composite gained 11.53 points, or 0.05%, reaching 23,250.20. The S&P 500 increased by 13.56 points, or 0.19%, to 6,978.38. During the session, the Dow hit a high of 50,512.79, setting a new intraday record.
Technology stocks continued their rebound from Friday, lending support to 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 expressed the view that software stocks are positioned for a rebound from their historic decline, arguing that the market's pricing of AI's short-term disruptive impact is unrealistic. A team led by Dubravko Lakos-Bujas suggested that investors should increase allocations to high-quality software stocks that are more resilient to AI disruption, as "extreme price movements" make a short-term rotation of funds back into the sector possible. The team wrote in a report, "Given light positioning, excessive pessimism regarding AI's potential to disrupt the software industry, and solid fundamentals, we believe the risk-reward balance is increasingly tilted toward 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 outperformance of many asset classes relative to the index is seen by traders as a bullish signal.
Sonali Basak, Chief Investment Strategist at iCapital, commented, "We don't 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 in the process."
On the economic data front, U.S. retail sales unexpectedly stalled in December, indicating that consumers exercised greater caution with their spending at the end of the year. Data from the Commerce Department on Tuesday showed that seasonally adjusted retail sales, not adjusted for inflation, were essentially flat after a 0.6% increase in November. Sales excluding auto dealers and gasoline stations were also unchanged.
Among 13 retail categories, eight registered declines, including clothing stores and furniture stores. Sales at auto dealerships also decreased. Conversely, spending increased at building materials stores and sporting goods retailers. These figures suggest that consumer spending momentum weakened as the holiday shopping season concluded. While many economists anticipate that tax refunds will support demand early in the 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 could stimulate demand, there are indications that non-essential 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 provide the latest employment data for January but will also include final benchmark revisions for job growth throughout 2025. The market is focused on this report for a clearer picture of the true state of the U.S. labor market.
Previously, the Bureau of Labor Statistics preliminarily indicated that job growth figures from April 2024 to March 2025 were overstated by 911,000. Market expectations are widespread that the final benchmark revisions for the full year 2025 will reflect the actual impact of this overestimation.
Comments