Daily Market Notes: 2-10-2023

In another astounding day in a series of many lately, where dramatic intraday shifts in both directions have become commonplace, the market pulled a negative beauty yesterday as large gains on the opening led to the major indices going negative at 12:30pm and from there until the close it was down, down, down.

As an example, the Dow got off to a 303 point higher start led by the entire investment world drooling over member DIS coming out with a better earnings report and its stock got as high as 118 for a gain of 6 after being even higher than that in the overnight session, and gains in CRM also helped.

But at 1:30pm, it actually went negative after slipping from those highs as the morning progressed and from that time until the close it sold off sharply to finally end with a stunning decline of 249 down to 33,700 which meant that it made a round-trip lower journey of 552 negative points from the high.

And that early DIS gain actually had the nerve to turn into a closing decline of 1.5 points despite everyone and his brother falling all over each other in happiness over its results. So the question now is – if the stock is so great, why the dramatic negative turnaround?

The S&P followed the same script with a 39 point early gain turning into a final close of down 36 to 4081 which is an extraordinary intraday downside reversal of 75 points, and how does that happen with so many stocks initially going higher after earnings?

And naturally the Nasdaq did the worst as usual on this type of day with an early advance of 160 ending with a 121 point decline as recently hot MSFT and META continued their recent selloffs after very strong gains this year, while TSLA appears to be unstoppable at the moment with a gain of over 100 points from its low of 102 in early January.

The Russell 2000 Index of small stocks had no chance once again while the VIX moved higher up to 20.71 on the lower market.

This extremely volatile trading has investors buying more into the Federal Reserve’s forecast that it will raise rates a couple of more times before holding them at a high level through this year. High rates can drive down inflation but also raise the risk of a recession and hurt stock prices.

A narrowing disconnect between markets and the Fed could lead to less volatility in the future but for now, with earnings reports pouring in from companies and questions remaining about whether the economy can avoid a recession, large swings are likely to remain the order of the day.

The two-year Note, rose to 4.48% from 4.43% late Wednesday and reached its highest level since mid-November during the day while the 10-year gained up to 3.66% from 3.62%. This pushed the inverted yield curve out to 82 basis points which is the highest such situation since the early 1980’s.

As mentioned above, the shocker of the day was DIS, which surprised the market when it reported stronger profit for the latest quarter than expected and said that it will cut  7,000 jobs as part of a plan to reduce its costs by $5.5 billion. And we described its sad ending after everyone in the investment world spent the day drooling over the stock as it got to over 118 in the early going before collapsing into the close.

The media giant joined the growing list of high-profile companies to announce layoffs amid an uncertain economy. The bulk began in the technology industry, where companies acknowledged misreading the boom coming out of the pandemic and hiring too many people. But job cuts have since spread out to other industries as well.

Despite recession fears, the jobs market has remained resilient as last week there was a slight increase of weekly jobless claims up to 196,000 which was slightly higher than the prior week, but it remained below the 200,000 level for a fourth straight week.

While a strong job market is good for workers and for sales of companies selling to them, the Federal Reserve also worries that it could lead to upward pressure on inflation. If employers have to give big raises to keep and attract workers, the worry is that could force them to raise prices for their own products and services.

Shares of casino operators did well after earnings reports raised optimism about momentum in both Las Vegas and Macau and MGM Resorts and WYNN rose as a result.

On the losing end was BAX with a large decline after the health care company reported weaker quarterly profit than forecast and gave a disappointing forecast for earnings this upcoming year. It also announced layoffs to cut costs, saying it would reduce its global workforce by less than 5%.

Another loser was MAT after the toymaker reported a big decline in sales and weaker profit than expected in the all-important holiday quarter.

Another drop for GOOG also weighed heavily on the market as it continued its rough week amid worries about competition from MSFT which recently unveiled a new Bing search engine powered by artificial intelligence.

This week sees the fourth-quarter earnings reporting season start to come into the homestretch with the following: yesterday –  MGM, HOOD, WYNN, DUK, HLT, K, PM, RL, ABBV, PEP, SONO while AFRM, MAT, TRI, HOOD and Dow component DIS ended lower; today – LYFT, EXPE, NWL, VRSN lower and NET, PYPL, YELP, DXCM higher.

Economic reports will have: yesterday – weekly jobless claims rose by 13K to 196K; today – February mid-month U. of Michigan Consumer Sentiment Survey rose to 66.4 while the inflation component came in at 4.2%.

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.