Earnings, Fed, Earnings, Jobs

Key Takeaways

One Hundred Of S&P 500 Companies To Report Fed Decision On Wednesday Jobs Number To Close Out The Week

It doesn’t get much busier than this. In the coming week we’re going to get earnings reports from one hundred of the S&P 500 companies, across a multitude of sectors. Mixed in between that will be Wednesday’s FOMC meeting and an announcement on interest rates. Finally, we’ll cap off the week with the January jobs number.

Markets so far are off to a good start in January. Through last week, the S&P 500 is up 6% while the Nasdaq 100 is up over 11%. Much of the gains have been fueled by optimism that the worst of inflation is behind us and the need for prolonged, elevated interest rates may not be necessary. A number of recent economic reports have shown either slowing or contracting prices and spending. That has led to a schism between markets and statements from Fed officials about the future of rates.

The Fed, for its part, has maintained a rather hawkish stance with respect to rates and is largely expected to announce a quarter point increase at the conclusion of the two day FOMC meeting on Wednesday. Looking forward to their next meeting in March, the market expects another quarter point hike. Beyond that; however, the market is forecasting rates to hold steady with a possible late year cut. Therefore, I will be listening very closely to the post meeting comments by Fed Chairman Powell.

If the Fed meeting is the center of an Oreo, earnings is the cookie surrounding it. So far, 29% of the S&P 500 have reported and earnings appear to be on track to have declined 5% year-over-year, with information technology and communications being some of the worst performing sectors. On tap this week are announcements from companies across different sectors. Some of the bigger names include Google GOOG parent company, Alphabet, Amazon AMZN, Apple AAPL, Caterpillar, Eli Lilly, Exxon, Ford, GM, McDonalds, Merk and Starbucks SBUX. Kicking things off after the close today will be Whirlpool which has an enormous presence in several sectors of the economy.

As I mentioned earlier, markets have hit the ground running this year. Stocks such as Tesla and Amazon are up 43% and 20%, respectively, through last week. That sets up an interesting showdown between the Fed and equity prices. On the one hand, stocks are showing signs of strength. Based on their performance so far, you get the sense investors recognize fourth quarter earnings are not going to be great, but they also are not as bad as expected and inflation has largely been tamed. That, in turn, is being reflected in a more optimistic outlook for the market. On the other hand, the Fed has not changed their tune. In their most recent statements, Fed officials have held steady in their message that rates not only need to move higher, but may need to stay there for an extended period. The question becomes, who will shine first?

For today, markets are trading lower in the premarket. The S&P 500 is off just under 1% while the Nasdaq 100 is down just over 1%. Oil continues to hover right around $80 a barrel and bitcoin is holding at just over $23,000. Volatility is up over 7% with VIX at just under 20. That isn’t too surprising considering this week’s calendar. For this week, I will not be surprised to see choppy trading which is why, as always, I would stick with your investing plan and objectives.

tastytrade, inc. commentary for educational purposes only.