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Monday 30 January 2023
Today’s newsletter is from Brian Sozzian editor-at-large e anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and go LinkedIn. Read this and other market news on the go with the Yahoo Finance application.
The markets are off to a flying start this year, making this a bizarre time to be an investor.
Bizarre mainly because the stock is posting gains (see Tesla up 44% YTD), yet Corporate America’s view couldn’t be more different than what the stock market is saying right now.
Sure, the old Wall Street saying is that stocks often “climb a wall of worries.” And perhaps that is what is happening in January. But honestly, does anyone pay attention to the economic data (beyond inflation) or the current earnings season?
“Yield curve inversion, M2 and PMI contraction, soft homebuilder and trucking surveys, and falling leading economic indicators all present a conundrum for [Federal Reserve Chairman] Jay Powell,” Evercore ISI’s Julian Emanuel recently noted. “As the soft landing versus 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:
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69% of S&P 500 companies reported a positive EPS surprise for the fourth quarter, lower than the five-year average of 77%.
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S&P 500 companies are topping fourth-quarter EPS estimates by 1.5% overall, which is lower than the five-year average of 8.6%.
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The decline in fourth quarter combined earnings for the S&P 500 is -5.0%. If -5.0% is the actual decline for the quarter, it will mark the first year-over-year decline the index has reported since the third quarter of 2020.
Miserable health readings from Corporate America. Driving has also been generally poor — just take a look at the succinct forecasts provided by 3M and Sherwin-Williams last week.
Anecdotally, executives seem pretty bearish to me in our chats.
On Friday, Intel CEO Pat Gelsinger delivered a pessimistic note about the economy. American Express CEO Stephen Squeri was more optimistic in our speech, but it wasn’t a perfect quarter for the credit card giant given the slowdown in the economy.
Additionally, we’re seeing signs of layoffs spreading beyond technology.
Some 219 companies laid off more than 68,000 tech employees this month, according to layoff-tracking website Layoffs.fyi. That’s 68,000 people who could contribute less to economic growth in the coming months. And then there are the likes of Newell Rubbermaid, for example, who fire 13% of their employees.
Now, the market awaits whether Apple, which reports earnings later this week, joins its rivals Microsoft and Amazon in cutting back amid what appears to be a slowdown in iPhone demand.
But who knows, Apple’s cuts might just fuel the current market.
A bizarre moment for investors. We’ll see what February brings.
Happy trading!
What to watch today
Economy
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10.30 am: Dallas Fed manufacturing businessJanuary (-15.0 expected, -18.8 in previous month)
Earnings
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Alexandria Real Estate Actions (I AM), GE Healthcare (GEHC), Helmerich & Payne (HP), J&J Snacks (JJSF), Philips (PHG), SoFi technologies (SOFI), Hydromassage (WHR)
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