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(Bloomberg) – Stocks gain footing as traders scrutinize a range of economic data ahead of the Federal Reserve’s decision and await earnings results from two of the biggest tech companies that have been the driving force behind the rally. I had a hard time.
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The stakes are high for Microsoft and Alphabet, two of the biggest companies in artificial intelligence software. Any disappointment could upset stocks, whose recent gains have continued to be driven by big tech companies. But hours before the numbers were released, Wall Street had to digest tougher-than-expected numbers on job openings, and as markets further pared back bets on the Fed’s March interest rate cut, investors・We are now trying to predict what Chairman Powell will say on Wednesday.
“Tomorrow will be important for markets as the intersection of Big Tech’s performance, ADP jobs data, Treasury issuance distribution, and Chairman Powell’s comments reach a critical juncture,” said Jose Torres of Interactive Brokers. It might happen,” he said. “I expect Mr. Powell to take some rate cuts off the table, perhaps by asserting the current outlook as aggressive.”
The S&P 500 index fluctuated, and the tech-heavy Nasdaq 100 index fell. Traders also focused on the results of economic barometer United Parcel Service, which fell on disappointing guidance. The delivery company plans to cut 12,000 jobs. Financial stocks outperformed as analysts took a bullish view on major U.S. banks. The two-year Treasury yield rose 7 basis points to 4.38%. The yield on the 10-year bond was little changed.
Swap contracts referencing the date of the next March Fed meeting this week are currently showing a decline of about a third of 25 basis points. A quarter-point rate cut in March was fully priced in, reflecting hopes late last year of a cooling labor market that did not materialize.
The number of job openings in the U.S. unexpectedly rose in December, hitting a three-month high, while fewer Americans are leaving their jobs. Tuesday’s data kicks off a slew of announcements providing insight into the state of the labor market heading into the new year. A report due Wednesday is expected to point to an easing in hiring costs at the end of 2023, with a government jobs report due Friday showing U.S. employers closed about 185,000 positions in January. It is expected that the addition of .
“The job market is key to future Fed policy,” said Jeffrey Roach of LPL Financial. “A strong job market, along with uncertainty over the impact of the Red Sea shipping disruption, is putting pressure on the Fed as it prepares markets for rate cuts.”
Separate data showed U.S. consumer confidence rose to the highest level since late 2021 in January as Americans became more optimistic about the economy and job market amid growing optimism about inflation.
“For the Federal Reserve, given that most statistical releases are interpreted through the Fed’s lens, whether inflation is likely to pick up again if consumers become more confident,” said Quincy Crosby of LPL Financial. is the center of concern.” “Nevertheless, consumer confidence will be key to ensuring economic conditions remain strong to ensure a soft landing.”
Lauren Goodwin of New York Life Investments says there’s significant volatility risk now because valuations improved significantly during the “Fed pivot rally.”
“But if 2023 has taught investors anything, it’s that timing the market is extremely difficult, and even when investors are calling for a recession or volatility, it’s best to sit tight and wait. “That means it’s unlikely to be an allocation approach,” he said. “As a result, we believe investors need to increasingly focus on quality and yield.”
In addition to Microsoft and Alphabet, three major tech companies with a combined market value of more than $10 trillion are reporting earnings this week.
These companies, along with other members of the S&P 500’s so-called “Magnificent Seven” growth companies, have forward price-to-earnings ratios that are 34% closer to the index, according to data compiled by Bloomberg. It brings a premium.
Recent trading shows that big tech companies continue to lead the market, with some pointing to that concentration as a red flag. The dominance of the top 10 stocks increasingly resembles the dot-com bubble, raising the risk of a downside, according to quantitative strategists at JPMorgan Chase & Co.
“If we don’t get shocking negative news from large tech companies’ earnings this week, and (especially) if the Fed sticks to its current (even more) dovish rhetoric, investors will get the green light. “We expect the stock market to rally in February, similar to the strong February rally in 2020,” said Matt Maley of Miller Tabak.
Company highlights:
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Apple Inc. fell after technology analyst Ming-Chi Kuo warned that demand for iPhones is expected to decline in 2024.
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Activist investor Nelson Peltz has announced that Walt Disney Co. is looking to expand its streaming business by tying its online service ESPN+ to major sports-focused companies like Netflix, according to people familiar with the matter. The company believes that it will be able to achieve profitability.
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Whirlpool Inc., which owns the Maytag and KitchenAid brands, predicts sales in 2024 will be lower than Wall Street expectations as consumers hold off on upgrading their appliances.
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Boeing has bowed to growing pressure to prioritize safety and speed up approval of its next 737 Max 7 plane after a near-disaster on one of its planes. withdrew a request for a critical safety waiver that would help.
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General Motors reported fourth-quarter results that beat Wall Street expectations and expects profits to rise this year on higher sales amid a strong U.S. economy.
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JetBlue Airways is considering further cost cuts, aircraft delays and a restructuring of its flight network in a bid to return to profitability after its planned takeover of Spirit Airlines nearly fell through.
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Pfizer reported fourth-quarter profit that beat analysts’ expectations after the U.S. government returned fewer doses of COVID-19 drugs than expected.
This week’s main events:
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China Non-Manufacturing PMI, Manufacturing PMI, Wednesday
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Japan’s industrial production, retail sales, housing starts, Wednesday
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The Bank of Japan announced a summary of its January policy meeting on Wednesday.
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Boeing releases financial results on Wednesday amid U.S. government safety investigation
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Wednesday’s Fed interest rate decision and Fed Chairman Powell’s press conference.
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U.S. Treasury Quarterly Refunds, Wednesday.
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China Caixin Manufacturing PMI Thursday
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Eurozone S&P World Manufacturing PMI, CPI, Unemployment Rate, Thursday
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US productivity, construction spending, ISM manufacturing, new unemployment claims, Thursday
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Apple, Amazon, Meta, Deutsche Bank, BNP Paribas earnings, Thursday
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Bank of England interest rate decision Thursday
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US employment statistics, University of Michigan consumer sentiment, factory orders, Friday
The main movements in the market are:
stock
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The S&P 500 was little changed as of 1:35 p.m. New York time.
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Nasdaq 100 fell 0.6%
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The Dow Jones Industrial Average rose 0.3%.
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MSCI World Index little changed
currency
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Bloomberg Dollar Spot Index little changed
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The euro was almost unchanged at $1.0836.
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The British pound fell 0.2% to $1.2678.
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The Japanese yen fell 0.2% to 147.77 yen to the dollar.
cryptocurrency
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Bitcoin rose 0.6% to $43,451.31
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Ether rises 3% to $2,376.53
bond
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The 10-year government bond yield was almost unchanged at 4.08%.
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Germany’s 10-year bond yield rose 3 basis points to 2.27%.
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The UK 10-year bond yield rose 2 basis points to 3.90%.
merchandise
This article was produced in partnership with Bloomberg Automation.
–With assistance from John Viljoen, Ryan Vlastelica, Jessica Menton, Elizabeth Stanton, Michael Mackenzie, and Isabelle Lee.
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