Traders have returned back to their cautious ways following the week’s strong run-up amid hopes of a soft landing and earnings optimism. The index futures are pointing to a modestly lower opening on Friday.
Cues From Thursday’s Trading:
On Thursday, the major averages closed with noteworthy gains as better-than-feared earnings news flow lent support. The indices opened higher and saw some volatility in early trading as traders reacted to stronger-than-expected fourth-quarter GDP data.
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After bottoming in late morning trading, stocks moved steadily higher through the remainder of the session.
The week’s rally has pushed the S&P 500 Index to nearly a two-month high and the tech-heavy Nasdaq Composite to its highest level since Sept. 19.
Thursday’s rally was supported by strong gains for energy, consumer discretionary, communication services, technology and real estate stocks.
| Index | Performance (+/-) | Value | |
|---|---|---|---|
| Nasdaq Composite | +1.76% | 11,512.41 | |
| S&P 500 | +1.10% | 4,060.43 | |
| Dow Industrials | +0.61% | 33,949.41 |
Analyst Color:
The fourth-quarter GDP data provides scope for the Fed to raise rates further without crushing the economy, said Daniel Berkowitz, senior investment officer at Prudent Management Associates. But he warned that monetary policy tends to transmit through the economy with a lag.
Upcoming earnings reports from large tech companies until early February is more important than the likely 25 basis-point hike in early February, he said.
“A set of much weaker-than-expected reports from these firms could dent the market’s strong start to 2023,” said Berkowitz.
“We maintain a positive outlook on equities for the intermediate term and believe, for the moment, economic data is pointing to a “soft-ish” landing for the economy this year, which is a net positive in our view.”
Futures Today:
| Index | Performance (+/-) | |
|---|---|---|
| Nasdaq 100 Futures | -0.50% | |
| S&P 500 Futures | -0.23% | |
| Dow Futures | -0.02% | |
| R2K Futures | -0.01% |
In premarket trading on Friday, the SPDR S&P 500 ETF Trust SPY fell 0.21%, to $403.90, and the Invesco QQQ Trust QQQ slumped 0.46%, to $291.99, according to Benzinga Pro data.
Upcoming Economic Data:
The Bureau of Economic Analysis will release its personal income and spending report for December at 8:30 a.m. EST. Economists widely expect a 0.2% month-over-month increase in personal income but a 0.1% dip in personal spending. This compares to November’s 0.4% and 0.1% increases, respectively. The annual rate of the core price consumption expenditure index — the Fed’s preferred gauge — may have slipped from 4.7% to 4.4%.
The final results of the University of Michigan’s consumer sentiment survey are due at 10 a.m. The headline consumer sentiment index is expected at 64.6, unchanged from the preliminary reading released in early January but up from December’s 59.7. Traders could sift through the forward inflation expectations readings of the survey.
The National Association of Realtors is due to release its pending home sales index for December, also at 10 a.m. EST. In November, the index, which is a leading indicator of home sales, fell 4% month-over-month to 73.9, marking the second-lowest monthly reading in two decades.
The Dallas Federal Reserve’s price consumption expenditure index will drop in at 10 a.m. EST.
Stocks In Focus:
- Intel Corp. INTC fell about 9.50% in premarket trading following its disappointing quarterly results.
- Chip-equipment maker KLAC Corp. KLAC fell over 5.50% in reaction to its quarterly results.
- Toymaker Hasbro Inc. HAS lost over 5% after the company announced plans to eliminate 15% of positions over the next few weeks to rein in costs.
- Payment processor Visa Inc. V rose about 1.50% following the release of better-than-expected fourth-quarter results.
Notable Companies reporting earnings:
Before the open:
- American Express Company AXP
- Chevron Corp. CVX
- Colgate-Palmolive Co. CL
Top Analysts’ Calls
- JPMorgan raises price target for Comcast Corp. CMCSA from $40 to $43.
- DA Davidson slashes Hasbro price target from $113 to $95.
- Bernstein lowers Intel’s price target from $23 to $20 and a host of other analysts lowered as well.
Commodities, Bonds, Other Global Equity Markets:
Crude oil futures rose for a third straight session on Friday and in early European deals, the WTI-grade crude oil rose 1.42% to $82.14. The recent strength reflects hopes of a soft landing that has positive implications for oil demand.
The yield on the benchmark 10-year Treasury note has breached the 3.5% level after beginning to turn higher on Thursday in the wake of the U.S. GDP data.
The Asia-Pacific markets that were open for trading closed Friday’s session mostly higher, although the Indian market was dragged by weaker sentiment surrounding Hindenburg Research’s short report on Adani Group.
China and Taiwan continued to remain closed for the weeklong Lunar New Year holiday.
European stocks traded with modest gains amid some volatility in late-morning trading.
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