A rare pull-back in US stock indices, and NVIDIA.

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There’s not much point in talking about yesterday’s moves in US stock index futures given the holiday-truncated session. But overnight there’s been a cooling in positive sentiment and all the major US indices are lower today. The S&P 500 has broken back below 5,000 for the first time since Wednesday, although it’s far too early to say if this is the start of a bigger correction or just a mild bout of profit-taking. The yield on the 10-year Treasury note has fallen a few ticks, but it’s only giving back a small fraction of its gains from last week. Bond yields flew higher as investors recalibrated the timing and size of rate cuts in 2024. This follows on from hawkish comments from FOMC members and an uptick in both CPI and PPI. We have to wait until a week on Thursday for the next inflation update which comes in the form of Personal Consumption Expenditures (PCE). Core PCE (which excludes food and energy) is the Fed’s preferred inflation measure, and it is this that has the 2% target on its back. Last month it dropped below 3% for the first time since early 2021. Investors will be hoping that it continues to trend lower, unlike both CPI and PPI. It will be interesting to hear if there’s an uptick in chatter about the possibility that the next Fed move on rates could be a hike rather than a cut. This follows on from comments last week from former Treasury Secretary Larry Summers. If rate hike speculation does pick up, it would cause a significant reset in the markets.

As far as the S&P is concerned, the first area of support to watch comes in around 4,930. If we see a sustained break below here then the pull-back could go as deep as 4,800 – a level which acted as resistance in early January.

Aside from that, market darling NVIDIA is having a rare down-day. The stock is off close to 6% ahead of its earnings release after Wednesday’s close.