Incredible Apple Saves!, COVID Infections Down, Next Week a Litmus Test (Market Recap January 28)
January 28 Market Recap – Apple saves the day, COVID infections down, next week’s data a litmus test.
Dow 34,725 or +460 or 1.3%
Nasdaq 13,770 or +2 or 0.00%
S&P 4,431 +34 or 0.77%
USD10Y 1.784% +2.3 bp or 1.3%
You Don’t Know What We Could Find…On a Magic (and Volatile) Carpet Ride
While the final numbers recorded every day this week don’t seem so wild (other than Friday), the markets experienced 5% swings multiple times this week as buyers and sellers battled for supremacy. The Dow was down in excess of 1000 points both Monday and Tuesday before settling in a bit more the balance of the week. Friday, buyers overwhelmed sellers on the back of an incredible quarter by Apple which recorded the most quarterly revenues in the history of the company.
The Bullets are Chambered but the Russians have yet to Spin the Cylinder
After noting last week that there hadn’t been a lot of talk in the press regarding the Russian menace of the Ukraine, it was difficult to escape the press stories this week past. Other than the news that the U.S. is readying 8,500 troops to deploy to Eastern Europe, there were no real developments on this front. The world and the markets await some type of (hopefully peaceful) resolution.
Infections and hospitalizations fell precipitously as had been hoped for and somewhat expected based on the data from South Africa. Deaths slowed on the margin which again is unsurprising as deaths are a lagging indicator. Still to be seen is how the new variant BA2, will affect the world’s population. Data has shown it is 150% more transmissible than Omicron but its relative potency and virulence is unknown at this time.
It is a massively important week for earnings and economic data next week, the results of which will either force the market to focus on the fundamentals (should the news be good) or allow the market to continue to be roiled by the fear of inflation and the Fed’s reaction to it. Tech, Financial, Energy, Industrial and Consumer Discretionary giants Google, Facebook, PayPal, Exxon Mobile, General Motors, Ford, Amazon and Starbucks all report next week. In addition, two Fed Presidents speak on Monday. Thursday as usual, is Initial Jobless Claims and on Friday the January Non-Farm Payrolls report along with the Unemployment Rate are released.
Market Data Points Next Week
- Monday – Chicago PMI, SF and KC Fed Presidents Speak. Earnings: N/A
- Tuesday – January Markit Manufacturing (final) ISM Manufacturing, JOLTS. Earnings: Exxon Mobile (XOM), Alphabet (GOOG), PayPal (PYPL), General Motors (GM), Starbucks (SBUX).
- Wednesday – ADP employment report. Earnings: Meta (formerly known as Facebook (FB)).
- Thursday – Initial Jobless Claims, Markit Services PMI (final) ISM Services, Factory Orders. Earnings: Ford (F), Amazon (AMZN).
- Friday – January Non-Farm Payrolls, Unemployment Rate. Earnings: N/A
January 28 Market Recap Trading…
Monday – Dow +99 to 34,364, Nasdaq +86 to 13,855, S&P +12 to 4,410, USD10Y (0.3) bp to 1.758%
- Buyers finally found a level they liked and rallied the market from deep lows to small gains on the day. The Dow was down 3.3%, the S&P down 4%, and the Nasdaq down 4.9% at the lows. It was the largest comeback for the three indices since October 2008.
- Eight of the of the eleven S&P sectors traded up today led by Consumer Discretionary, Energy, and Industrials.
- Earnings: IBM seemed to add to the positive momentum beating top and bottom-line expectations, trading up 6% after the close and then refused to give EPS guidance on the call causing the stock to sink back to even.
- January Markit Services and Manufacturing PMI both missed expectations.
- Markets may not be out of the woods yet…Dow futures are trading down 271 points or 0.75%.
Tuesday – Dow (66) to 34,297, Nasdaq (315) to 13,539, S&P (53) to 4,356, USD10Y +2.3 bp to 1.783%
- Markets tumbled significantly again to open the session today, rallied hard, lost steam and finished in the red.
- Nine of the of the eleven S&P sectors traded lower led by Tech, Communication Services, and Consumer Discretionary.
- Earnings: Johnson and Johnson (JNJ) beat earnings, missed on revenues, and gave upbeat full year guidance and traded up 2.86%. General Electric (GE) beat earnings but missed on revenues and the stock fell 5.98%. American Express (AXP) beat numbers and climbed 8.92%. Microsoft (MSFT) reported after hours, beat expectations handily, and traded up 1.2% post close. Texas Instruments (TI) blew out their numbers and traded up 6.42% post close.
- January Consumer Confidence was better than expected at 113.8 vs 111.7.
Wednesday – Dow (129) to 34,168, Nasdaq +3 to 13,542, S&P (6) to 4,349, USD10Y +8.3 bp to 1.866%.
- All three indices were rallying today until 2pm EST when Fed Chair Jerome Powell briefed the press after the conclusion of the Fed January monetary policy meeting. While interest rates remain unchanged for now, Powell stated that there is further inflation risk and as such both interest rate hikes and shrinking the Fed’s balance sheet are appropriate and needed. Further, he stated that the economy is more than strong enough to accommodate those policies.
- Nine of the eleven S&P sectors traded down today led lower by Real Estate, Materials, and Industrials. Only Financials and Tech traded higher.
- Earnings: Boeing (BA) reported a miserable quarter, posting a $4.29 billion annual loss and mounting charges related to its 787 Dreamliner jet. The stock fell 4.82%. Tesla (TSLA) blew out deliveries, margins, revenues and earnings and traded slightly down in post market trading. Intel (INTC) beat numbers but traded down 2.75% post close as management guided margins lower due to massive spending to increase capacity.
Thursday – Dow (7) to 34,160, Nasdaq (189) to 13,352, S&P (23) to 4,326, USD10Y (5.9) bp to 1.807%.
- Six of the eleven S&P sectors traded positively today led higher Energy, Utilities and Consumer Staples. Consumer Discretionary was the worst performer, down 2.27%.
- Jobless claims met expectations at 260,000 claims vs last week’s slightly revised higher print of 290,000 claims.
- 2021 GDP printed at 5.7% growth, the highest number since 1984 and Q4 GDP grew at an annualized 6.9%.
- December Durable Goods Orders were -0.9% month over month vs expectations of –0.6%.
- Earnings: Apple (APPL) absolutely destroyed estimates, beating their sales numbers in every category save the iPad in addition to reporting their largest single quarter of revenues earned in the history of the company. In addition, CEO Tim Cook noted that supply chain issues are moderating. The stock climbed 5% post-close. McDonald’s (MCD) reported that they have been passing rising costs onto the consumer and yet they missed their revenue and earnings estimates. MCD traded down 0.44% today.
Friday – Dow +564 to 34,725, Nasdaq +417 to 13,770, S&P +105 to 4,431, USD10Y (2.3) bp to 1.784%.
- Stocks surged today on the back of a massive quarterly report by Apple last night. The rally allowed all three indices to wipe out the massive losses from earlier in the week and finish in the green for the week.
- Ten of the eleven S&P sectors participated in the rebound rally today led Tech, Real Estate, and Communication Services. The only sector that traded down was Energy.
- January University of Michigan Consumer Confidence disappointed at 67.2 vs expectations of 68.5.
- December Core PCE printed inline at +0.5%. Year over year Core PCE increased by 4.9%, the largest gain since 1983.
- Consumer Spending, Disposable Income, and Consumer Spending were all lower than expected while Personal Income grew.
- Earnings: Chevron (CVX) missed their numbers and traded down 3.52%. Caterpillar (CAT) blew out their earnings and handily beat revenue expectations but warned of margin compression due to higher costs and traded down 5.19%.
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