Daily Market Notes: 2-8-2023

In another bizarre day of trading with violent moves in both directions, the major indices all finished with an upside rush after having bounced around in a very volatile manner earlier in the session.

The Dow started out lower and was down by 105 points at the time that Fed Chairman Powell made his remarks about the direction of interest rates at 12:45pm. From there, it initially skyrocketed to a 216 point gain at 1pm, then plunged to a decline of 252 points at 1:35pm before reversing direction once again to storm back into the close and finally ended with an advance of 254 up to 34,156 led by gains in BA, CVX, DD and MSFT stunningly.

The S&P followed the same pattern with being around even at the 12:45 time of the remarks, followed by a 50 point advance at 1pm which then became a 23 point loss at 1:35pm before also storming ahead into the close with a final gain of 53 up to 4164.

And sure enough on these higher days lately, the Nasdaq did the best with a final advance of 226 up to 12,113 led by the aforementioned takeoff in MSFT plus the recent strong showings from META and TSLA.

The Russell 2000 Index of small stocks sort of got dragged higher with a gain of 15 up to 1972 while the VIX came down on the strong equity showing with a decline to 18.66

And similar to last week’s violent moves after the announcement of the latest interest rate hike, namely a large down move followed by a surge into the close, there were conflicting remarks that set things off in both directions, as for instance it was mentioned  that last Friday’s strong jobs report will not by itself change where interest rates are heading, which sort of laid out the bullish stock scenario and he added that progress is being made on inflation, although a long battle remains.

The strong jobs report had raised concerns about upward pressure on inflation and worries the Fed may end up keeping rates higher for longer, as it has been warning.

But Powell added that the market’s big moves since the jobs report have gotten it closer to be in sync with the Fed’s thinking, because stocks declined for a couple of days after the report, but now investors raised their forecast for how high the Fed will take rates by the summer.

“We have a significant road ahead to get inflation down to 2%,” which is the Fed’s target, Powell said and added that “there has been an expectation that it will go away quickly and painlessly. I don’t think that’s at all guaranteed.” This is why the market sold off for a while as described above.

Powell also said that if more jobs reports or inflation data come in way above expectations, the Fed may ultimately raise rates even higher than it’s been saying.

After pushing the federal funds rate to a range of 4.50% to 4.75%, up from virtually zero a year ago, the Fed has said it envisions a couple of more increases before holding steady through the end of the year.

Treasury yields have moved higher in response to this and yesterday the yield on the 10-year Note got up to 3.68% from 3.64% late Monday. The two-year yield also moved higher up to 4.49% from 4.47% and is near its highest level since November, up from 4.09% just last week.

A relatively lackluster earnings reporting season with profits expected to decline by around 5% from a year ago continues to roll on as CARR dropped despite matching analysts’ expectations for profits in the latest quarter. It also gave a forecast for revenue this upcoming year that was slightly above expectations, but analysts pointed to a deceleration in orders.

On the winning side was Dow component DD, which rose after reporting stronger profit for the latest quarter than analysts expected. ATVI gained after the video-game company reported stronger revenue and profit for its latest quarter than expected.

And as mentioned above, Dow component MSFT moved strongly higher after it said that it is using ChatGPT-like technology in its Bing search engine.

This week sees the fourth-quarter earnings reporting season start to come into the homestretch with the following: yesterday –  CHGG, PINS, SPG, CARR lower and Dow component DD plus HTZ, ATVI, SAVE, RCL higher; today – UBER, UA, ENPH, FTNT, CVS, FOXA higher while CMG, LUMN, ILMN, YUM are lower; tonight – DIS, ORLY, MGM, HOOD, WYNN; Thursday – EXPE, HLT, K, PYPL, MO, PEP; Friday – NWL.

Economic reports will have: yesterday – December trade deficit widened to $67.4 billion; Thursday – weekly jobless claims; Friday – February mid-month U. of Michigan 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.