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  • Writer's pictureJeff Stukey

Who says January’s a long month?

Who says January’s a long month?

This week starts slow, but we’ll end it with a full-fledged Jobs Week for February. Tuesday ushers in new JOLTS data for December, Wednesday brings us private-sector ADP (ADP) payroll totals for this month (along with the latest Fed decision on interest rates), and Friday is the big non-farm payroll survey from the U.S. Bureau of Labor Statistics (BLS). All of the forecast numbers are expected to tick down in the labor market, aside from the Unemployment Rate, which is expected to lift back up slightly to 3.8%.

In addition, our new week also features several marquee names of the Tech industry reporting earnings: Microsoft (MSFT) and Alphabet (GOOGL) on Tuesday, Apple (AAPL) and Amazon (AMZN) on Thursday — all after the closing bell, as per normal. These major firms are all expecting growth on both top and bottom lines, year over year, led by anticipated earnings growth of +285% from Zacks Rank #2 (Buy)-rated Amazon, and +15% revenues growth year over year from Zacks Rank #2-rated Microsoft. (In other news, Amazon is no longer pursuing the acquisition for iRobot, citing antitrust issues, sending the smaller stock down -20% at this hour.)

Elsewhere, there will be a bevy of other reports hitting the tape this week, from Case-Shiller home prices to Consumer Confidence to Q4 Productivity to S&P and ISM Manufacturing. We also look for fresh Q4 earnings reports from across the spectrum of sectors, from AMD (AMD) to General Motors (GM) to Mondelez (MDLZ) to Pfizer (PFE) to Snapchat (SNAP) and Starbucks (SBUX) — and that’s just tomorrow!

Off near-term lows on January 18th, three of the four major stock market indices have rebounded into positive territory year-to-date. Only the Russell 2000 is still -3% from the start of this year’s trading, though that’s up from -6% on January 18th. The small-cap index, heavy in regional bank representation, needs three relatively strong trading days to finish the month in the green, along with the others which are already there.

We do not expect Wednesday’s Federal Open Market Committee (FOMC) decision to be any factor at all on trading behavior this week. Even among those analysts who still believe — or wish for — six interest rate cuts between now and the end of the year do not foresee one coming this early. Most of these folks look toward early March for the first cut, though this would likely take much weaker numbers in the economy before the Fed would risk loosening the monetary screws.

Market News

U.S. stocks ended mostly lower on Friday, with the S&P 500 and Nasdaq ending their six-day winning streak. However, stocks initially rallied as economic data showed core PCE inflation slowed to its lowest level in nearly three years. The Dow ended the day in positive territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) rose 0.2% or 60.30 points to end at 38,109.43 points.

The S&P 500 slid 0.1% or 3.19 points, to finish at 4,890.97 points. Tech stocks were the worst performers.

The Technology Select Sector SPDR (XLK) declined 1.2%. The Healthcare Select Sector SPDR (XLV) gained 0.6%, while the Energy Select Sector SPDR (XLE) jumped 0.7%.

The tech-heavy Nasdaq fell 0.4% or 55.13 points to close at 15,455.36 points.

The fear-gauge CBOE Volatility Index (VIX) was down 1.41% to 13.26. A total of 9.6 billion shares were traded on Friday, lower than the last 20-session average of 11.6 billion.

Economic Data Lift Investors’ Sentiment

The S&P 500 and Nasdaq ended their six-day winning streak on Friday. Till Thursday, the S&P closed at a record high for the fifth straight session. However, the rally lost steam on Friday despite economic data showing that inflation cooled as the year came to a close.

The Commerce Department said that personal consumption expenditure (PCE) rose a meager 0.2% in December on a month-over-month basis, while it held steady at 2.6% on a year-over-year basis.

Core PCE, which excludes the volatile energy and food prices, increased 0.2% in December after increasing 0.1% in November, However, year over year, core PCE rose 2.9%, the lowest rate since March 2021.

Inflation is still elevated but has been slowing substantially. The Federal Reserve has also hinted at cutting interest rates this year, which has been giving a boost to investors’ confidence.

Friday’s PCE inflation reading comes just a day after data showed that the U.S. economy grew at a faster pace than expected. The Commerce Department said that U.S. GDP grew a solid 3.3% at an annualized rate in the fourth quarter of 2023, surpassing the consensus estimate of a gain of 2% but lower than 4.9% increase in the third quarter.

Intel Weighs Heavy on Major Indexes

The S&P 500’s decline on Friday came after Intel Corporation (INTC) gave a weak fiscal first-quarter outlook despite the chipmaker reporting better-than-expected fourth-quarter 2023 results. The company reported fourth-quarter 2023 earnings of $0.54 per share.

Chip manufacturing tools maker KLA Corporation (KLAC) also fell 6.6%. However, shares of American Express Company (AXP) jumped 7.1% after the company offered a better-than-expected earnings outlook for the full year.

The Earnings season is in full swing and investors are keeping a close watch on the quarterly results of American corporates, as a big batch of companies gear up to report their results in the coming weeks.

Economic Data

In other economic data released on Friday, personal spending rose 0.7% in December, surpassing estimates of a rise of 0.5%. Personal income rose to 0.3%, which came in line with expectations.

The personal savings rate fell to 3.7% in December, down from 4.1% in November.

Pending home sales increased 8.3% month over month in December.

Weekly Roundup

Although the S&P 500 and Nasdaq finished in the red on Friday, all three major indexes clinched weekly gains. The S&P 500 rose 1.1% for the week. The tech-heavy Nasdaq ended the week 0.9% higher, while the Dow climbed 0.7% for the week.

*Content provided by Zacks Investment Research. An American company dedicated to the production of independent research and investment-related content. It was founded in 1978 by Len Zacks, based on his insights while pursuing his Ph.D. at MIT.

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