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Soft Landing Ahead (February 3 Market Recap)?

February 4, 2023

Soft Landing Ahead (February 3 Market Recap)?

Indices 

  • Dow 33,926, -152 or -0.44%. 
  • Nasdaq 12,006, +385 or +3.3%. 
  • S&P 4,070, +66 or +1.6%. 
  • USD10Y 3.532%, +1.3bp or +0.37%. 
  • WTI Crude $73.23/bbl, -$6.15 or –7.75%.  

Soft Landing Ahead? 

Other than a bevy of poor tech earnings (AMZN, APPL, GOOG) that didn’t move the market all that much, it couldn’t have been a better week for economic news. The Fed raised rates by 25bp as expected and warned of several further hikes while noting that inflation data is moving in the right direction. The January jobs report absolutely crushed expectations with 517,000 jobs being added vs expectations of 189,000. The Unemployment Rate is at 3.4%, the lowest its been since May 1969. Lastly, Average Hourly Wages, which has recently become an important metric, was in line with last month’s reading at +0.3% and a tenth lower than last month’s print of +0.4%.  

To recap the current situation: the Fed is closer to the end than the beginning of their rate hike cycle, inflation is decelerating, the labor market is extremely strong and yet there is scant evidence of spiraling wage inflation. The Fed may just pull off a Captain Sully and execute a soft landing of the economy.  

“I think the market’s coming closer to our view that inflation is declining rapidly,” said Jay Hatfield, CEO at Infrastructure Capital Management.” [The Fed’s] models have proven to be terrible. They missed this inflation on the upside, and now they’re missing the deflation.” 

Next Week 

It quiets down next week with a continued spate of earnings and a few pieces of economic data of lesser significance. The inflation expectation data on Tuesday and Friday will be noted as Fed Chair Powell mentions them quite a bit.  

Economic Calendar 

  • Monday – N/A. 
  • Tuesday – January New York 1 and 5-year Inflation Expectations. Earnings: Chipotle Mexican Grill (CMG). 
  • Wednesday – Earnings: Disney (DIS). 
  • Thursday – Initial Jobless Claims. Earnings: Pepsi Co (PEP), PayPal (PYPL). 
  • Friday – February University of Michigan Consumer Sentiment and 1 and 5-year Inflation Expectations.

If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review. 

February 3 Daily Trading Recap… 

Monday – Dow -260 to 33,717, Nasdaq –228 to 11,393, S&P -52 to 4,017, USD10Y +3.2bp to 3.551%. 

  • Ten of the eleven S&P sectors traded down today, led lower by Energy, Technology, and Communication Services. 
  • Stocks fell on profit taking as there were no major news nor company specific announcements to which attribute the decline. 

Tuesday – Dow +368 to 34,086, Nasdaq +190 to 11,584, S&P +58 to 4,017, USD10Y –2.2bp to 3.529%. 

  • All eleven S&P sectors traded higher today, led by Materials, Consumer Discretionary and Real Estate. 
  • January Consumer Confidence Index missed expectations at 107.1 vs 109.5 and vs last month’s 109 print. 
  • Earnings: Caterpillar (CAT), Advanced Micro Devices (AMD) beat numbers and traded up 1.5% in the extended market. McDonalds (MCD) beat their numbers but warned of inflationary pressures and traded down 1.29% during the normal session. General Motors (GM) traded up more than 8% after beating their numbers. United Parcel Service reported a mixed quarter but still traded up over 4%. 

Wednesday – Dow +7 to 34,092, Nasdaq +231 to 11,816, S&P +42 to 4,119, USD10Y –12.2bp to 3.397%. 

  • Ten of eleven S&P sectors traded higher today, led by Technology, Consumer Discretionary, and Communication Services. 
  • January ADP Employment Report disappointed with 106,000 jobs vs 190,000 expected and vs 253,000 last month. 
  • January S&P Manufacturing PMI (final) was slightly better yet still showing contraction at 46.9 vs 46.8 expected and vs last month’s 46.8. 
  • January ISM Manufacturing Index disappointed at 47.4% vs 48% expected and last month’s 48.4% 
  • December JOLTS increased to 11 million vs 10.3 million expected and last month’s 10.4 million print. 
  • Despite the Federal Reserve Open Market Committee raising rates by 25bp as expected, markets rallied hard during Fed Chief Jerome Powell’s press conference. Powell indicated that although inflation is decelerating, the committee still believes that “ongoing” rate increases will be appropriate. 
  • Earnings: Meta Platforms (META) beat their revenue numbers, announced a $40 billion stock buyback and traded up +20% in after-hours trading. 

Thursday – Dow -39 to 34,053, Nasdaq +384 to 12,200 S&P +60 to 4,179, USD10Y -0.1bp to 3.396% 

  • Seven of eleven S&P sectors traded up today, led by Communication Services, Consumer Discretionary, and Technology. 
  • Jobless claims continued to fall to 183,000 claims vs 200,000 expected and last week’s unrevised print of 200,000. 
  • Earnings: Ford (F) missed their profit estimates badly and traded down –6.95% in the extended session. Amazon (AMZN) traded down 2% post-close after beating revenue estimates but guiding Q1 estimates lower. Alphabet (GOOG) missed their numbers and traded down 4.4% after hours.

Friday – Dow -127 to 33,926, Nasdaq -193 to 12,006, S&P -43 to 4,136, USD10Y +13.6bp to 3.532%. 

  • All eleven S&P sectors traded down today, led lower by Consumer Discretionary, Real Communication Services, and Utilities. 
  • January Non-Farm Payrolls absolutely crushed expectations: 517,000 jobs were added last month vs expectations of 189,000 and December’s 260,000 print. 
  • The January Unemployment Rate fell from 3.5% to 3.4%, the lowest since May 1969. 
  • Average Hourly Earnings were in-line with expectations at +0.3% vs last month’s +0.4%. 
  • January S&P U.S. Services PMI (final) was slightly better at 46.8 vs 46.6 expected and last month’s 46.6 print. 
  • January ISM Services Index improved substantially to 55.2% vs expectations of 50.6% and last month’s 49.6% print. 
  • The Atlanta Fed’s GDPNow tracker estimates Q1 GDP growth at +0.7% vs Q4’s +2.9% and vs Q1 of 2022 –1.6% print.
  • Earnings: American Express (AXP) missed but traded up on positive guidance. Intel (INTC) reported a miserable quarter and traded down 6%. 

If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review. 

Disclaimer: This is not a recommendation to buy or sell any of the securities listed above. I personally, or a family member whose account I control, have positions in the following securities/assets…Bitcoin, Cardano, Chainlink, Ethereum, ETHE, GBTC, and TSLA. 

 

 

 

Category iconEducation Tag iconinflation,  market recap

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