Daily Market Notes: 1-23-2023

After a rough three days in a holiday-shortened week, the market redeemed itself Friday on the upside with a blistering rally that got the Nasdaq slightly positive for the week with the Dow and S&P still lower. On the other hand, with three weeks gone in the first month of 2023, all of the major indices are still ahead for the new year with the Nasdaq leading the pack with a 6% advance in January so far.

It was the best day for the market in two weeks with the Dow ending higher by 330 points up to 33,375 after being down by 96 points to begin the session. It was led on the upside by AXP, CRM, DIS, HD, CVX and MSFT while GS ended lower after a poor week with potential investigations keeping this one under pressure.

The S&P did much better with a 73 point advance due to some help once again from the former beaten-down technology leaders which have started to show that they still have a pulse this year, with MSFT, GOOG, ADBE, the Chinese tech issues, TSLA and NFLX doing well, the latter on a nice earnings beat.

The Nasdaq did the best of all due to the aforementioned issues and gained 288 up to  11,140 to end higher for the third straight week in 2023. The Russell 2000 Index of small stocks gained 30 up to 1867 while the VIX fell on the stronger day in equities and ended at 19.85 as it stays in this very narrow lower range for quite a while now.

The market had made that hesitant start on another weak economic report, with December existing home sales falling for the 11th straight month. This raised fears that the economy may not be able to avoid a recession, as the full weight of the Federal Reserve’s hikes to interest rates last year start to make their way through the system.

In prior months, bad news on the economy was often good news for stocks on the assumption that it could mean that the Fed might ease up on its rate hikes. But bad news on the economy is increasingly becoming bad news for the market, which is worrying more about the prospects of a serious recession.

Making things more complicated, several Fed officials through the week kept repeating the message that they will likely hike rates further and then hold them there a while to make sure the nation’s high inflation is really crushed. Even though inflation has begun to slow, upward pressure remains on it from a still-solid U.S. jobs market and other factors.

Many investors came into this week already forecasting a modest or short recession, but they also were hoping that rate cuts by the Fed later this year could mean a rebound for markets. But last week’s sour economic data and comments from central bankers threaten such forecasts.

But on Friday, Fed Governor Christopher Waller said he favors just a quarter-point hike on February 1st at the next interest rate policy update. Waller also said that rates are already high enough to be slowing the economy. The remarks could have helped calm rising-rate worries in the market and helped stocks do better.

Travel stocks did well also as cruise lines rose along with websites like BKNG.

The trading could also have been influenced by January’s monthly quadruple “witching hour” with the expiration of some $797 billion in stock-option contracts which was the largest since January 2022 and the fourth largest on record.

Treasury yields mostly rose, clawing back drops from earlier in the week driven by worries about a weakening economy. The yield on the 10-year Treasury rose to 3.48% from 3.40% late Thursday. The two-year yield actually rose a bit up to 4.19% from 4.13%.

The Nikkei 225 added 0.6% after Japan reported that its consumer inflation rate hit 4% in December, its highest level in 41 years. The high reading may add to pressures on the Bank of Japan to alter its longstanding policy of keeping its key interest rate at an ultra-low level of minus 0.1%. But economists expect price pressures to ease in coming months as inflation elsewhere declines.

This week sees the largest number of S&P companies reporting earnings for the fourth-quarter so we will just list them day by day: today – BKR, SYF higher. The rest of the week will be highlighted by MSFT, GOOG, AAPL and TSLA, among hundreds of others.

Economic reports will have: today – December L.E.I.; Thursday – weekly jobless claims,  December durable goods orders, December new homes sales, first estimate of 4Q G.D.P.; Friday – December personal income and spending, final U. of Michigan January  Consumer Sentiment Survey.

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.