Are Markets About to Falter? | January 27, 2023

AUTHOR: Jason Roque, MS, CFP®, APMA®, AWMA®
TITLE:       Investment Adviser Rep – CCO
TAGS:   S&P 500, NASDAQ, GDP, PCE, PMI, Earnings

Markets surged as earnings season rolled on last week. Is it justified or is it about to falter?

Monday   S&P 500 1.19% | NASDAQ 2.01%

Earnings season continues this week but reporting on Monday was light. Markets continued the trend of gains from last week with Tech stocks leading the way.

Tuesday   S&P 500 0.07% | NASDAQ 0.27%

Markets pitched lower at the open on missed earnings data from 3M. Both manufacturing and services improved last month but remain in contractionary territory. The markets ended up relatively unchanged on the day.

Wednesday   S&P 500 0.02% | NASDAQ 0.18%

Equities opened the day deep in the red. There were 33 major earnings reports out yesterday with only 7 missing expectations. This allowed marked to claw their way out of the hole. Wednesday left markets hanging on to a weekly gain after two days of treading water.

Thursday   S&P 500 1.10% | NASDAQ 1.76%

GDP data and earnings did not disappoint on Thursday. The expectation around GDP was for a 2.6% fourth quarter. It ended up rising at a rate of 2.9% on first estimate. Investors applauded the performance with markets rising over 1%.

Friday   S&P 500 0.25% | NASDAQ 0.95%

The Personal Consumption Expenditures index (PCE) was released on Friday. This is the preferred measurement of inflation for the Federal Reserve Board (FRB). The data came through softer than last month, but as expected. Softening inflation creates less cause for an aggressive FRB when it comes to interest rates. Consumer sentiment was also out on Friday and it rose back into the 60’s. It’s still at a very subdued level, but this is something to be watched. If consumer confidence flares back up, so could inflation.

Conclusion   S&P 500 2.47% | NASDAQ 4.32%

Markets enjoyed strong growth last week, but it may have all been for not. The FRB is meeting this week and is expected to raise rates 0.25%. If they were to raise rates more than expected, we could see a repeat of last summer. In July, markets were beginning to celebrate the potential of a recession and the monetary accommodation that could follow. It seems the same could be said of January. The FRB could be more hawkish on Wednesday leading to a pull back of recent highs.

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