- 100 S&P 500 companies reported
- Federal Agency Decision Wednesday
- Job number ending the week
It’s never been this busy. Over the next week, he will get earnings reports for various sectors from 100 of the S&P 500 companies. In the meantime, his FOMC meeting on Wednesday and an announcement on interest rates are mixed in. Finally, he concludes the week with the January Jobs numbers.
So far, the market is off to a strong start in January. Until last week, the S&P 500 is up 6% and the Nasdaq 100 is up over 11%. Much of the rise has been fueled by optimism that the worst of inflation is behind us and that we may not need a long period of high interest rates. Many recent economic reports point to a slowdown or contraction in prices and spending. This has created a split between Fed officials’ statements and the market regarding the outlook for interest rates.
The Federal Reserve has maintained a fairly hawkish stance on interest rates and is highly expected to announce a quarter-point hike at the end of Wednesday’s two-day FOMC meeting. Looking forward to the next meeting in March, the market expects another quarter point rate hike. More than that; however, the market expects rates to remain stable, with a possible rate cut later in the year. As such, we will be listening very carefully to Fed Chair Powell’s post-meeting comments.
If the Federal Reserve is at the heart of Oreo, earnings are the cookies around it. So far, the S&P 500 has reported 29%, and earnings appear to be on track for a 5% year-over-year decline. Information technology and telecommunications is one of his worst performing sectors. This week we have announcements from companies in various sectors.Larger names include Google
As I mentioned earlier, the market has started off well this year. Stocks such as Tesla and Amazon are up 43% and he 20% respectively until last week. This makes for an interesting showdown between the Fed and stocks. On the one hand, equities are showing signs of strength. Based on performance so far, investors appear to be aware that Q4 earnings won’t be big, but it’s not as bad as expected and inflation is largely muted. This is reflected in a more optimistic outlook for the market. Meanwhile, the Fed hasn’t changed its stance. In recent statements, Fed officials have stuck to the message that rates not only need to rise, but may need to remain so for the long term. The question is who will blink first.
The market today is trading lower in the premarket. The S&P 500 was down just under 1% and the Nasdaq 100 was down just over 1%. Oil continues to hover around $80 a barrel and Bitcoin is just above $23,000. Volatility is up over 7% and the VIX is just below 20. Given the calendar for the week, this isn’t all that surprising. I wouldn’t be surprised to see some choppy trading this week, so as always, stick to your investment plans and objectives.
Tastytrade, Inc. commentary is for educational purposes only.