The market drifted to a mixed close on Friday, and following recent pattern, the Dow and S&P were able to cut morning losses to drift to a higher close, but the Nasdaq remained lower which kind of took some steam out of the late rally in the other two.
The Dow was 108 points lower at its worst level and was able to end 169 point higher to 33,869 led by gains in UNH, GS, AMGN and WMT. It still ended the week down by a small amount.
The S&P was able to come back from a 21 point decline to end with a closing gain of 9 up to 4090 but also ended the week lower at a 1.1% drop, which was its worst showing since December.
The Nasdaq was the worst performer with a 71 point drop to 11,718 for its weakest showing since the week of December 23, 2022 as some of the hottest stocks in 2023 finally found the sledding a little difficult at the higher levels and all ended lower such as TSLA, which finally cooled off a bit after its gain of more than 100 points from its recent low in late 2022. Also hot META and MSFT also cooled off a bit as well after their strong showing this year.
The Russell 2000 Index of small stocks did nothing with a 3 point gain up to 1918 while the VIX actually ended down a bit at 20.53 after getting up as high as 21.9 on the morning lows as mentioned above. It continues to stay in one of the narrowest ranges ever as the market lurches one way or the other with no clear direction evident at the present time.
Stocks have been struggling since rallying in January on hopes that the economy could avoid a severe recession and that cooling inflation could get the Federal Reserve to take it easier on interest rates. Worries have worsened recently that a still-strong jobs market could push upward on inflation and keep rates at a higher-for-longer level, much as the Fed has been warning. And central banks around the world are intent on tightening the screws by raising rates further, even if at a slower pace than before.
And this newfound concern about the Fed keeping rates higher for longer has been reflected in the bond market where yields for the 10-year Note rose to 3.73% from 3.66% late Thursday while the 2-year got up to 4.50% from 4.48%. It was at 4.08% just over a week ago and is near its highest level since November.
And as we approach the end of the fourth-quarter earnings reporting season, results are mixed with LYFT tumbling by 36% following its latest report. The ride-hailing company gave a forecast for revenue in the first three months of 2023 that fell short of analysts’ expectations.
Given worries about still-high inflation and a slowing economy eating into corporate profits, analysts have been cutting their forecasts for upcoming earnings, as for instance analysts have lowered their expectations for S&P companies’ first-quarter earnings by 4.5%, which is a deeper cut than average.
NWSA fell after the owner of The Wall Street Journal and other media reported weaker quarterly results than expected. It also said it will cut 5% of its workforce in 2023 as it contends with higher interest rates and inflation. EXPE also did poorly after reporting weaker profit and revenue for the latest quarter than expected.
On the winning side were those energy stocks which did well last year in a lower market and continue to move ahead this year with XOM reaching a new all-time high ahead of its going ex-dividend today.
Oil prices rose after Russia said it will now cut oil output by 500,000 barrels a day starting next month. Western countries had capped the price of Russia’s crude over its invasion of Ukraine and it ended at $79.52 a barrel.
The other big risk is if growth in workers’ wages stays too high, which the Fed could also see as pushing upward on inflation and potentially causing a re-acceleration.
Earnings reports this week include: today – CAR higher and FIS lower; Tuesday – Dow component KO plus ABNB, DVN, MAR; Wednesday – Dow component CSCO plus ANAL, ET, KFT, SHOP; Thursday – AMAT, HAS; Friday – DE.
Economic reports will be the main focus this week with: Tuesday, the big one with January C.P.I., estimated to be higher by 6.2% while the core rate is supposed to be at 5.4%, January small business index optimism; Wednesday – January retail sales, January industrial production and capacity utilization; Thursday – January P.P.I., January housing starts, weekly jobless claims; Friday – January L.E.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.