Stocks Rally on US Economic Strength and US-China Trade Optimism

• January 17, 2025

The S&P 500 Index SPY today is up +1.06%, the Dow Jones Industrials Index DIA is up +0.91%, and the Nasdaq 100 Index QQQ is up +1.56%. March E-mini S&P futures ( ESH25 ) are up +1.05%, and March E-mini Nasdaq futures ( NQH25 ) are up +1.59%.

Stocks today are moderately higher, with the S&P 500 and Nasdaq 100 posting 1-1/2 week highs and the Dow Jones Industrials posting a 1-month high. Lower T-note yields support stocks today as the 10-year T-note yield fell to a 2-week low of 4.566%. Also, the strength in chip stocks is lifting the overall market.

Today's US economic news was better than expected and bolsters optimism in the economy. Dec housing starts rose +15.8% m/m to a 10-month high of 1.499 million, stronger than expectations of 1.327 million. Also, Dec building permits, a proxy for future construction, fell -0.7% to 1.483 million, stronger than expectations of 1.460 million. In addition, Dec manufacturing production rose +0.6% m/m, stronger than expectations of +0.2% m/m and the largest increase in 4 months.

US stocks also have carryover support from strength in European stocks as the Euro Stoxx 50 rallied to a 24-year high today. Stocks also rose on a possible easing of US-China tensions after the Xinhua News Agency reported that Chinese President Xi Jinping had a telephone conversation today with President-elect Trump, in which Trump said, “The call was a very good one for both China and the U.S.A.”

World equity markets are finding support today on signs of strength in China's economy, which improves global growth prospects. China's Q4 GDP rose +5.4% y/y, stronger than expectations of +5.0% y/y and the fastest pace of expansion in six quarters. Also, China's Dec industrial production rose +6.2% y/y, stronger than expectations of +5.4% y/y and the biggest increase in 8 months.

Today, the International Monetary Fund (IMF) raised its 2025 global GDP forecast to 3.3%, up from a 3.2% forecast in October, citing stronger US demand.

Hawkish comments today from Cleveland Fed President Hammack are negative for stocks when she said we still have an inflation problem, and the Fed can be "very patient" on further interest rate cuts.

The price of Bitcoin E today are up +2 ticks. The 10-year T-note yield is down -0.8 bp to 4.605%. Mar T-notes today rose to a 2-week high, and the 10-year T-note yield fell to a 2-week low of 4.566%. T-notes are climbing today on carryover support from rallies in European government bonds. Also, a decline in inflation expectations is bullish for T-notes after the 10-year breakeven inflation rate fell to a 1-week low today at 2.405%.

Gains in T-notes are limited due to hawkish comments from Cleveland Fed President Hammack, who said the Fed could be "very patient" on further interest rate cuts. Also, today's stronger-than-expected US economic reports on Dec housing starts and Dec manufacturing production are bearish for T-notes.

European government bond yields today are moving lower. The 10-year German bund yield fell to a 1-week low of 2.506% and is down -3.3 bp to 2.514%. The 10-year UK gilt yield dropped to a 1-1/2 week low of 4.611% and is down -4.8 bp to 4.631%.

ECB Governing Council member and Bundesbank President Nagel said, "We shouldn't be too hasty in our efforts to normalize monetary policy. Inflation is currently still elevated, and service prices in particular continue to rise dynamically."

The IMF today cut its Eurozone 2025 GDP estimate to 1.0% from an October forecast of 1.2%.

UK Dec retail sales ex-auto fuel unexpectedly fell -0.6% m/m, weaker than expectations of +0.3% m/m.

Swaps are discounting the chances at 99% for a -25 bp rate cut by the ECB at its January 30 policy meeting.

US Stock Movers

Chip stocks today are moving higher and supporting gains in the overall market. GlobalFoundries GFS is up more than +5%. Also, Marvell Technology MRVL is up more than +3%, and Nvidia NVDA is up more than +3% to lead gainers in the Dow Jones Industrials. In addition, Broadcom AVGO , Qualcomm QCOM , Advanced Micro Devices AMD , Microchip Technology MCHP , ON Semiconductor ON , NXP Semiconductors NV NXPI , and Texas Instruments TXN are up more than +2%.

Cryptocurrency-related stocks are climbing today, with the price of Bitcoin COIN , MicroStrategy MSTR , MARA Holdings MARA , and Riot Platforms RIOT are up more than +4%.

Intel INTC is up more than +7% to lead gainers in the S&P 500 and Nasdaq 100 after a report from the website SemiAccurate said the company may be an acquisition target.

Qorvo QRVO is up more than +13% after the Wall Street Journal reported that Starboard Value has amassed a 7.7% stake in the company and plans to push for changes to boost its stock price.

Lumentum Holdings LITE is up more than +5% after Barclays double-upgraded the stock to overweight from underweight with a price target of $125.

Truist Financial Corp TFC is up more than +4% after reporting Q4 taxable equivalent net interest income of $3.64 billion, better than the consensus of $3.60 billion.

Cloudflare NET is up more than +2% after Citigroup upgraded the stock to buy from neutral with a price target of $145.

Applied Materials AMAT is up more than +2% after KeyBanc Capital Markets upgraded the stock to overweight from sector weight with a price target of $225.

Edison International EIX is up more than +2% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $96.

JB Hunt Transport Services JBHT is down more than -6% to lead losers in the S&P 500 after reporting Q4 EPS of $1.53, weaker than the consensus of $1.63.

Crowdstrike Holdings CRWD is down more than -3% to lead losers in the Nasdaq 100 on signs of insider selling after an SEC filing showed CSO Henry sold $1.42 million shares on Wednesday.

State Street STT is down more than -2% after it forecasted 2025 net interest income "roughly flat" at $2.92 billion, weaker than the consensus of an increase to $2.96 billion.

Vistra Corp VST is down more than -2% after a fire broke out at the Moss Landing Power Plant in California, where Vistra owns a battery storage system.

Regions Financial RF is down more than -1% after saying it expects Q1 net interest income to be down modestly from Q4.

HubSpot HUBS is down more than -1% after TD Cowen downgraded the stock to hold from buy.

Spotify Technology SPOT is down more than -1% after Wolfe Research downgraded the stock to peer perform from outperform.

Earnings Reports (1/17/2025)

Citizens Financial Group Inc (CFG), Fastenal Co (FAST), Huntington Bancshares Inc/OH (HBAN), Regions Financial Corp (RF), Schlumberger NV (SLB), State Street Corp (STT), Truist Financial Corp (TFC).

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policyhere.