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Monday, January 30, 2023
Today’s newsletter is from Brian Sozzieditor-in-chief and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Read this and other market news wherever you are with the Yahoo Finance app.
The markets are off to a flying start this year, making it a strange time for an investor.
Bizarre mainly because stocks are posting gains (see Tesla up 44% year-to-date), and yet the view of corporate America couldn’t be more different from what the stock market is saying right now. moment.
Of course, the old adage on Wall Street is that stocks often “climb a wall of worry”. And that may be what happens in January. But honestly, is anyone paying attention to economic data (beyond inflation) or the current earnings season?
“The inverted yield curve, contraction in M2 and PMI, homebuilder and trucking surveys, and falling major economic indicators all present a conundrum for [Federal Reserve Chairman] Jay Powell,” Evercore ISI’s Julian Emanuel noted recently. “As the soft landing-recession debate intensified ahead of the Fed [meeting] February 1, there is reason to believe that a recession is likely in the second half of the year.”
And here’s some earnings season data from FactSet:
69% of S&P 500 companies reported a positive EPS surprise for the fourth quarter, which is below the five-year average of 77%.
S&P 500 companies beat fourth-quarter EPS estimates by 1.5% overall, below the five-year average of 8.6%.
The combined decline in earnings for the fourth quarter of the S&P 500 is -5.0%. If -5.0% is the actual decline for the quarter, it will be the first year-over-year decline reported by the index since the third quarter of 2020.
Miserable readings on the health of American companies. Forecasts have also been generally poor: just take a look at the meager forecasts released by 3M and Sherwin-Williams last week.
For the record, the leaders seem to me quite bearish in our discussions.
Intel CEO Pat Gelsinger sounded a pessimistic note about the economy during our chat last Friday. American Express CEO Stephen Squeri was more upbeat in our conversation, but it wasn’t a perfect quarter for the credit card giant given the downturns in the economy.
Additionally, we are seeing signs of layoffs extending beyond technology.
About 219 companies laid off more than 68,000 tech workers this month, according to layoff tracking website Layoffs.fyi. These are 68,000 people who will perhaps contribute less to economic growth in the months to come. And then there are people like Newell Rubbermaid, for its part, which is laying off 13% of its office workers.
Now the market is waiting on whether Apple, which reports earnings later this week, will join rivals Microsoft and Amazon in cutting amid what appears to be a slowdown in iPhone demand.
But who knows, Apple’s cuts can only fuel the current market.
A bizarre moment for investors. We’ll see what February brings.
What to watch today
10:30 a.m. ET: Dallas Fed Manufacturing ActivityJanuary (-15.0 expected, -18.8 in previous month)
Alexandria Real Estate Stocks (ARE), GE Healthcare (GEHC), Helmerich and Payne (HP), J&J Snacks (JJSF), Phillips (PHG), Sofi Technologies (SOFI), Tourbillon (WHR)
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