Daily Market Notes: 3-3-2023

In another astounding upside turnaround, the market was gliding along mainly on the negative side as the Dow was higher in the range or around 90 points or so due primarily to the strong showing from component CRM which accounted for most of the advance after its better than expected report on Wednesday evening while both the S&P and Nasdaq were lower.

Then all of a sudden, it received a very strong upside jolt at around 1:30pm when Atlanta Fed President Bostic came mentioned the not so dramatic idea that raised hopes the central bank may not ramp up its fight against inflation as aggressively as feared. That countered recent talk from other officials who raised worries about much bigger increases to interest rates following several hotter-than-expected reports on the economy. He told reporters that for now he still supports lifting the Fed’s key overnight rate to a range of 5% to 5.25%, up from its current 4.50% to 4.75%. That is a little lower than a good chunk of investors are forecasting.

So despite interest rates rising and staying higher even as stocks underwent this rally, the Dow turned that gain as mentioned above into a strong closing advance of 341 up to 33,003 led by of course CRM, which basically stayed the same at around a 20 point advance all day, and it was joined on the upside by BA, CAT, MCD and MSFT.

The S&P made that astounding upside turnaround with the 8 point decline at 1:30pm turning into a closing advance of 29 to 3981. And please let it be noted that this items has held below the 3940 level, which is the 200-day moving average every day this week and has never closed below it, even as it trades under this level during the day, so this is obviously becoming a major downside support level.

The Nasdaq also joined in the upside reversal and turned its 100 point loss at that time into a final advance of 83 up to 3981 despite a selloff in TSLA, but gains in others like MSFT helped in the advance.

The Russell 2000 Index of small stocks once again made a nominal advance with a 4 point gain to1902 while the VIX, which has been weak even on lower days, really dropped to 19.59 as it remains in a very narrow range for the longest time with a slightly downward bias.

The mood was more negative in the morning after weekly jobless claims remained low for the seventh straight week under 200,000. It is the latest data to show the job market remains more resilient than expected, even though the Federal Reserve has jacked up interest rates at the fastest pace in decades.

While that’s good news for workers and calms fears about a recession in the near term, the fear is that a too-strong jobs market could add upward pressure to inflation. Inflation has recently been more stubborn to cool than expected.

The fourth-quarter unit labor costs report showed a gain of 3.2%, which was twice as high as expected while productivity was down to 1.7% and both could also add pressure to inflation. It follows other reports over the last month showing overall job growth, spending by consumers and inflation at multiple levels of the economy all remain higher than expected.

The strong economic reports have forced investors to raise its forecasts for how high the Fed will ultimately take interest rates. It also means a delay in any hopes for upcoming cuts to rates.

This perception has been evident in the bond market where the yield on the 10-year Note rose to 4.06% from 4.00% late Wednesday and from less than 3.40% earlier this year. It is near its highest level since November while the 2-year rose to 4.90% from 4.88% and is close to its highest level since 2007.

Some earnings highlights included the previously mentioned Dow component CRM which rose by 11% for one of the market’s biggest gains after it topped forecasts for profit and revenue last quarter. It also gave a stronger-than-expected forecast for upcoming results. M rose by 11% after reporting stronger profit and revenue for the holidays than analysts expected. It also gave a forecasted range for earnings this year that was above some analysts’ expectations.

It ran counter to several other big retailers that have offered discouraging forecasts recently given the struggles of some U.S. households amid still-high inflation.

On the losing side was TSLA, which sank after its investor day when it said that its next generation of vehicles will cost half as much but provided few details about its design in a presentation to investors.

The fourth-quarter earnings reporting season is coming to an end with the following lineup: yesterday  –  Dow component CRM plus OKTA, M, KR, AEO higher while SNOW, BBY, BILI, HRL, BOX were lower; today – AVGO, AI, JWN higher while  ZS, , VSCO, COST, DELL, MRVL lower and HIBB.

Economic reports will have: yesterday –  weekly jobless claims slipped by 2K to 190K for the seventh straight week below 200K, unit labor costs for the 4Q rose by 3.2% while 4Q productivity slipped to 1.7%; today – ISM February Services Index came in at 55.1.

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.