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Here are the takeaways from today’s Morning Brief. sign up Every morning you will receive the following message in your inbox:
New record highs for the stock market will be challenged over the coming week by a slew of corporate earnings reports and a new reading of the Fed’s recommended inflation measure.
With most financial institutions having reported, technology-related results will likely be in the spotlight, with Netflix (NFLX) reporting on Tuesday and Tesla (TSLA) reporting on Wednesday. Reports from Johnson & Johnson (JNJ), United Airlines (UAL), Verizon (VZ), and AT&T (ATT) also highlight Wall Street’s quarterly report as one of its busiest weeks .
In terms of economic indicators, the first economic growth rate for the fourth quarter is scheduled to be announced on Thursday. Meanwhile, the latest release of the personal consumer expenditures (PCE) index, the Fed’s preferred inflation measure, is scheduled for Friday.
All of this will happen while stocks are trading at or near all-time highs. The S&P 500 (^GSPC) ended Friday at 4,839, a new high for the benchmark average. The Dow Jones Industrial Average (^DJI) also hit a new closing high of 37,863. Meanwhile, Friday’s big winners were tech stocks, with the Nasdaq Composite Index (^IXIC) up 1.7%. All three major averages for January are in positive territory.
Friday’s rally came as consumer sentiment data released by the University of Michigan showed consumers had the best feeling about the economy since July 2021.
The positive tone from consumers is consistent with an increasingly optimistic outlook from Wall Street economists as January data continued to beat expectations.
Last week, a survey of December retail sales showed that consumers ended 2023 in better shape than many economists had feared. And while headlines about layoffs in a variety of sectors have been making headlines in recent weeks, hard data on unemployment benefit claims recently hit the lowest weekly level since September 2022.
Resilient data has analysts project The U.S. economy grew at an annualized rate of 2% in the fourth quarter, ahead of preliminary gross domestic product (GDP) figures expected on Thursday.
The team at Oxford Economics is increasingly confident that the economy will continue to expand over the next year.
Matthew Martin and Ryan Sweet of Oxford Economics wrote: “The probability of a recession has declined over the past few months due to easing financial conditions on the back of a strong labor market, slowing inflation, and an impending shift to Fed rate cuts. I did,” he said. he wrote in a memo to customers Friday.
”[Oxford’s] The baseline forecast for January included an upward revision to this year’s GDP growth rate, a decline in the peak unemployment rate, and solid consumer spending. The subjective probability of a recession this year is currently less than 50%. ”
Beyond economic growth, the hottest debate on Wall Street continues to be about when the Federal Reserve will cut interest rates.
As of Friday afternoon, investors gave a 49% chance of a March rate cut, according to the CME Fed Watch Tool. Just a week ago, investors were pegging an 81% chance of a rate cut in March.
Many economists believe the downward path of inflation will be a key factor when the Fed begins its first rate cuts. Jan Hatzius, chief economist at Goldman Sachs, believes the first rate cut will be in March.
“The impetus for the rate cut in our expectations, and as Chairman Powell said in his December press conference, is that inflation is returning to target,” Hadsius said on Yahoo Finance Live. Told. “If inflation returns to target, it is very likely that interest rates will be cut as well, because the 5.37% federal funds rate is very, very high compared to an economy that is producing 2% inflation. Because you can see it.”
The latest information on inflation will be released on Friday when the PCE index for December will be released.
Economists believe that the annual “core” PCE, which excludes the volatile categories of food and energy, In December, it was 3%. Most economists last month expected “core” PCE to be 0.2%.
“This report should increase the Fed’s confidence that inflation is returning to 2%,” Michael Gapen, U.S. economist at Bank of America, said in a note to clients on Friday. .
The Federal Reserve is in a blackout period ahead of its next meeting on January 30, and earnings are expected to be a key driver of stock market sentiment over the coming week.
For Netflix, the focus will continue to be on how demand for new advertising space and a crackdown on password sharing will impact its future growth prospects. Profit margins remain a key focus at Tesla, but investors will also listen closely to comments from CEO Elon Musk, who reportedly wants more control of the company.
Overall, given the average large-cap exposure is so large, trends in technology earnings could indicate where the market is headed in the short term.
“Technology Show” “The ability to grow revenues and earnings at a good pace, even if growth slows, is critical to continuing to move this market forward,” Lerner said Wednesday, ahead of the tech company’s earnings, in a Yahoo! told Finance. Keith Lerner told Yahoo Finance.
John Butters, senior earnings analyst at FactSet, stressed Friday that fourth-quarter earnings are currently off to a “weak start.” As his 10% of S&P 500 companies have finished reporting, the index is currently trending down in his earnings per share by 1.7%.
But, as Butters points out, this is largely because the focus of the first two weeks of results was financials. In the coming weeks, the conversation will turn to technology and communication services, which are expected to see an increase in revenue compared to the same period last year.
weekly calendar
Monday
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economic data: Leading index, December (forecast -0.3%, previous -0.5%)
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revenue: United Airlines (UAL), Logitech (LOGI), Zion Van Corporation (ZION)
Tuesday
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economic data: Richmond Manufacturing Business Index for January (forecast -6, advance forecast -11)
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revenue: 3M (MMM), Halliburton (HAL), Johnson & Johnson (JNJ), Lockheed Martin (LMT), Netflix (NFLX), Texas Instruments (TXN), Verizon (VZ),
Wednesday
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economic data: MBA home loan applications, week ending January 19 (+10.4% last week). S&P Global U.S. Manufacturing PMI, preliminary figures for January (forecast 47.6, preliminary value 47.9). S&P Global US Services PMI January preliminary figures (expected 51, preliminary value 51.4). S&P Global US Services PMI January Composite (prev. 50.9)
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revenue: AT&T (ATT), Abbott (ABT), Freeport-McMoRan Copper and Gold (FCX), IBM (IBM), Las Vegas Sands (LVS) SAP (SAP), Tesla (TSLA)
Thursday
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economic data: Number of first-time unemployment insurance claims over the weekend (estimated at 200,000, previously 187,000). The number of unemployment insurance claims for the week ending January 13 continued (predicted 1.84 million, previously 1.81 million). Q4 GDP, initial forecast (expected annual rate +2.0%, previous +4.9%). First forecast for personal consumption in the fourth quarter (annualized forecast +2.2%, previous +3.1%). Q4 Core PCE Index (expected annualized rate of 2.0%, previously 2.0%). Wholesale inventory month, December preliminary figures (forecast -0.2%, previous -0.2%). Durable goods orders, provisional figure for December (1.5% expected, 5.4% previously). New home sales, December (expected 647,000 units, previous 590,000 units)
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revenue: American Airlines (AAL), Alaska Airlines (ALK), Capital One (COP) Comcast (CMCSA), Dow (DOW), Humana (HUM), Intel (INTC), Levi’s (LEVI) Southwest (LUV), T-Mobile (TMUS), Union Pacific (UNP), Valero (VLO), Visa (V)
Friday
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economic news:Personal income, month-on-month change, December (forecast +0.3%, previous +0.4%). Personal spending in December compared to the previous month (forecast +0.4%, previous +0.2%). December PCE inflation rate, month-on-month (forecast +0.2%, previous -0.1%). His PCE inflation rate in December, year-on-year (expected + 2.6%, previous + 2.6%). “Core” PCE in December compared to the previous month (expected +0.2%, previous +0.1%). “Core” PCE in December compared to the same month last year (forecast +3.0%, previous +3.2%).
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revenue: American Express (AXP), Colgate Palmolive (CL)
josh schafer I’m a reporter for Yahoo Finance.
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