Stock Market: Beginning of a Divergence?

NYSE traders
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NYSE traders

Beginning of a divergence? Sales of bonds have been the fuel for the stock market rally in January. However, stocks have moved sideways in the last few days, but the bond market is not being sold. We're in a narrow range between 1,495 and 1,515 on the S&P 500. Something is going to break soon.


1) The euro dropped as European Central Bank Chief Mario Draghi said inflation is expected to fall in the coming months, which will allow the ECB's monetary stance to remain "accommodative."

2) Retail sales: No post-holiday blues? There was a lot of worry about retail this month, given the higher gas prices and the payroll tax increase that kicked in Jan. 1.

Gap, Limited Brands, Nordstrom, and Macy's all much stronger than expected, offset by a few disappointments (Ann, Buckle, Cato).

According to RetailMetrics, sales were up 4.5 percent vs. 2.8 expected.

But wait ... weren't there reports of markdowns? Didn't that impact margins?

Yes, but on the surface, it didn't look like markdowns impacted profits too much. Macy's, TJX Cos., and Gap raised estimates, Limited said it is comfortable with guidance.

Still, the improvement in guidance was very modest ... a couple pennies ... and that suggests strong sales did come somewhat at the expense of profits.

Also remember, input costs (cotton) are lower than last year, so there was more flexibility on the markdowns.

Bottom line: Traffic was good and clearance was not a huge problem. They put a lot of stuff on sale, cleared it, and it didn't make the quarter dramatically worse ... or better.

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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