For the sixth straight trading session of the new year 2023, the S&P has now reversed itself each time (three up and three down), but with a slightly higher bias so far as investors await the super-important December C.P.I report tomorrow morning and a bunch of earnings reports on Friday morning, mainly in large financial stocks.
Yesterday the indices started a bit higher, then made a lower dip at 10:30m, from which they recovered and moved higher into the close with a last hour upward further push, which is the exact opposite of what they did on Monday to start the new week.
The Dow got down to a 96 point loss as mentioned above and then turned higher for the rest of the session and finally ended with a nice 186 point gain up to 33,704. It was led by advances in AMGN, CAT, GS, HD and V, and these were some of the ones that led the Dow lower on Monday, go figure, as what changed between the two days?
The S&P was down by as much as 15 points in mid-morning and also pushed higher for the remainder of the session and ended at its best level with a 27 point advance up to 3919 and it got help from some of the former Nasdaq leaders such as NFLX in particular while the Nasdaq itself did the best with a 107 point advance up to 10,742 as some of those beaten-down former leaders such as AMZN and META continued to come further off of their recent lows.
The Russell 2000 Index of small stocks also did well with a 26 point gain up to 1822 and the VIX came lower as it should do on a higher day and ended at 20.58 as it continues to stay in this very narrow range for the longest time.
The market has had a positive start to 2023 due to hopes that cooling inflation and a slowing economy may convince the Federal Reserve to ease off its accelerated rate hikes over the past year. Those moves can risk causing a recession.
Investors were hoping for some clues about where the Fed is heading from Chair Jerome Powell, who made some remarks at a forum in Stockholm yesterday, but he gave little information about interest rates.
Tomorrow’s C.P.I. report is expected to show a further slowdown in the inflation rate to 6.5% from 7.1% in November and a peak of 9.1% in July. Obviously anything above or below this expectation should move the market either lower or higher as the case may be.
Some optimists believe that the Fed may stop its hikes soon and perhaps even cut rates by the end of the year, although that was not what two officials said on Monday, which was what apparently caused that late selloff.
Past rate increases and high inflation have already hurt economic activity around the world, and the Fed has pledged to keep rates high for a while to ensure the job is done on inflation. It doesn’t envision any rate cuts until 2024.
The World Bank said that the global economy will come “perilously close” to a recession this year in its annual report.
Troubled home goods retailer BBBY reported weaker revenue for its latest quarter than analysts expected, though the size of its loss was not as bad as feared and as a result the stock made a large upward move from very low levels after it also announced cost cuts to save cash by closing some stores as it considers a bankruptcy filing.
Job cuts are also continuing at tech-oriented companies, a notable soft spot in what has been a healthy U.S. job market. The continuing collapse for crypto pushed COIN to say that it is cutting 20% of its workforce and it rose as well.
Bond yields rose with the 10-year Note at 3.61% from 3.53% late Monday while the 2-year was up to 4.27%.
Earnings this week will see: yesterday – BBBY, of all things, higher ; Friday – a host of large bank earnings such as: Dow components JPM and UNH plus BAC, BLK, C, DAL, BNY and WFC.
Economic reports will have: yesterday – December small business optimism index fell to a 6-month low at 89,8 which marked the 12th straight month below the 49-year average of 98; Thursday – weekly jobless claims and the all-important December C.P.I.
Donald M. Selkin
Chief Market Strategist
Don Selkin is the Chief Market Strategist at Newbridge Securities Corporation, member FINRA/SIPC and provides the Fair Value analysis for CNBC each morning. The commentary provided in this Market Letter is intended to provide our current or potential customers with timely market analysis and should not be considered a research report. This Market Letter may contain, and is limited to: Discussions of broad based indices; Commentaries on economic, political or market conditions; Technical analysis concerning the demand and supply for a sector, index or industry based in trading volume and price; Statistical summaries of multiple companies’ financial data, including listings of current ratings; and, recommendations regarding increasing or decreasing holdings in particular industries or securities. This Market Letter does not make a financial or investment recommendation or otherwise promotes a product or service of the firm. This Market Letter contains only news, facts, and commentary on information previously reported from a news source believed to be accurate and reliable by the author. These news sources include the following: {Bloomberg Financial, Reuters, and Associated Press}. It is possible that at any given point in time, the author, Newbridge Securities, or one or more of its employees or registered individuals associated with Newbridge Securities, may hold a position, either long, or short, as well as options, bonds or other instruments in the companies mentioned in this report.