Daily Market Notes: 1-18-2023

The market had come off of a very strong week, its best one since November, with the Dow and S&P ahead by 2.7% and 2% respectively, while the Nasdaq was the hero with a strong 4.8% advance as some of the beaten-down large technology former leaders finally regained a pulse, so to speak, and this group included AAPL, AMZN, NFLX, NVDA and TSLA, among others.

The only problem with this advance is that it led the VIX to end the week at a low level of 18.35 which would appear to be too far down to support much further upward movement and as a result, the market ended mixed to the downside yesterday, as the Dow did the worst because of a huge loss in the shares of GS, which has a major effect on this index because it is price-weighted. The loss alone here took more than 100 points by itself from the Dow, which was also hurt by declines in other recent favorites such as HON, UNH, BA, CAT and 3M.

The S&P actually tried to do better with a 16 point early advance giving way due to that Dow pressure and it finally ended with a closing loss of 8 down to 3990. The hero of the day was the Nasdaq which actually ended higher for the seventh straight day for the first time since November 2021, by 15 up to 11,095 and has been the best performer in 2023 so far after being the worst last year. It was helped by advances in AAPL, NVDA and TSLA.

The Russell 2000 Index of small stocks did little with a 3 point loss while that low VIX ended higher at 19.36 which is close to its long-standing support level in the 19 area.

The main focus of investors will now be the fourth-quarter earnings results which are supposed to decline by 3.9% and this would be the first year over year setback in this regard since the Covid-induced shellacking during the third quarter of 2020.

Investors will be listening closely to financial updates from companies to better determine whether inflation will continue squeezing consumers’ wallets and hurting  corporate profits.

Several banks reported encouraging financial results last week, such as JPM, BAC and WFC, but at the same time also said a mild recession is likely on the horizon for the U.S. economy.

Bond yields remained relatively stable, with the 10-year Note up to 3.54% from 3.5% late Friday while the 2-year ended at 4.17%.

Today’s December P.P.I. report hopefully will show a continuation of the trend that has been easing for six straight months, and has given investors more hope that the Fed could soon consider softening its policy on interest rates. And it did come in lower than expected (see below), which is leading to a higher start today. The central bank, though, has so far been adamant that it plans to continue raising rates this year and that it sees no rate cuts happening until 2024 at the earliest.

The central bank has raised its key overnight rate to a range of 4.25% to 4.50% from roughly zero a year ago. The Fed will announce its next decision on interest rates February 1st and investors are largely forecasting a raise of just 25 basis points, down from December’s half-point hike and from four prior increases of 75 basis points. Top of Form

The fourth-quarter earnings parade continues this week with the following: yesterday – Dow component GS sharply lower and MS higher; today – UAL, SCHW, IBKR, JBHT higher and PNC is lower; tonight – KMI; Thursday – FAST, NFLX, KEY, FITB, NTRS, MTB and Dow component PG; Friday – SLB and SST.

Economic reports will have: today – December retail sales fell by 1.1% while ex-food and energy were up 0.1%, December P.P.I. fell by 0.5%, December industrial production fell by 0.7% to the lowest since September 2021and capacity utilization dropped to 78.8%, Fed Beige Book at 2pm; Thursday – weekly jobless claims and December housing starts; Friday – December existing home sales.

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.