(2023) S&P500 Just Logged its Best January in Four Years. What Is Next?

S&P500 Just Logged its Best January in Four Years. What Is Next?

US stock indexes have closed out their first month of gains for 2023 with the Nasdaq marking a gain of nearly +11% followed by a gain of over +6% for the S&P 500 and nearly +3% for the Dow. In fact, the S&P 500 just logged its best January in four years, and the Nasdaq posted its best January gain since 2001.

There’s now a historical and technical argument being made by the bulls that a strong January performance following a negative year has historically yielded impressive full-year returns. It’s only happened five times, whereas the stock market was down the year before, but opened up January with a +5% or higher bounce to the upside (1954, 1961, 1967, 1975, 2019, and 2023) but in each one of those years, the full year return showed big double-digit gains ranging from up +20% to +45%.

Fed’s policy 

Investors today have all eyes on the Fed’s latest policy decision due at 1 p.m. CST and a press conference with Fed Chair Jerome Powell at 1:30. According to the CME FedWatch Tool, Traders currently give a 25-basis point hike a a nearly 100% chance (99.9%) versus 0% for a 50-basis point hike and a less than 1% chance that the Fed leaves rates unchanged. Obviously, a surprise 50-point hike will likely spell trouble for the bulls who have been betting on a more accommodative Fed by the second-half of 2023.

Some bulls are even anticipating rate cuts, although that runs counter to the Fed’s vow to keep rates high for longer than previous tightening cycles. Aside from the amount of today’s rate hike, the biggest question of the moment is whether the Fed will hike rates at its next meeting on March 21-22 or will it decide to pivot. The Fed may not provide that answer today but investors will be listening very closely to Powell’s follow-up press conference in an effort to garner clues as to how officials are leaning. Bulls are pointing to data released yesterday that showed a slowdown in wage gains in the 4th quarter and expect the Job Openings and Labor Turnover.

Data to watch

Survey today will reveal a substantial pullback in company hiring. Analysts anticipate the number of open jobs will drop from 10.5 million in November to 10.2 million for December, though some estimates are as low as 9 million. The trajectory of the data has implications for the Fed’s future policy decisions as the central bank has repeatedly pointed to the labor market as a major factor behind inflation remaining stubbornly elevated.

Also out today is ADP’s Employment Report which economists expect to show job gains dropping back to +158,000 from +235,000 in December. That is slightly lower than consensus for the official January Employment Report due on Friday, with analysts expecting a gain of around +185,000 versus +223,000 in December. Importantly, the Labor Department on Friday will also release revisions for last year’s payrolls data, based on updates to its annual benchmarking process.

There has been some speculation that the government may have overshot on job gains by as much as +1 million or more. Other key data today includes the ISM Manufacturing Index and Construction Spending.

Turning to earnings, Facebook-parent Meta kicks off a two-day stretch of big tech earnings that can potentially reverberate through the wider market. Results from Snap yesterday don’t bode well for tech companies dependent on advertising. While sales were flat for Q4, Snap says sales in the current quarter have declined -7% so far and could be down as much as -10% for the full quarter.

Alphabet, Amazon, and Apple report tomorrow. Today’s earnings highlights include Allstate, Altria, Boston Scientific, Corteva, Humana, Johnson Controls,  MetLife, Novo Nordisk, Novartis, Suncor, and TMobile.

S&P500 Just Logged its Best January in Four Years. What Is Next?


(2023) Fed’s Policy Statement. Trifecta of Big Tech Earnings

Fed’s Policy Statement. Trifecta of Big Tech Earnings
Fed’s Policy Statement. Trifecta of Big Tech Earnings

Stock investors are feeling somewhat relieved after the Federal Reserve yesterday delivered an as expected +25-basis point rate hike.


The traders are now bracing for a trifecta of big tech earnings after the market closes by Alphabet, Apple, and Amazon. Bulls were happy to hear Fed Chief Jerome Powell in his follow up press conference acknowledge that the “disinflation process has started”. However, he also stressed that it would be “very premature to declare victory” over inflation at this point. Powell also argued that the risk of not lifting rates enough to tackle inflation was greater than that of tightening too much.

Many bulls are also pointing to language in the the Fed’s policy statement that acknowledges that higher interest rates tend to have a delayed impact and that the Fed will let economic data determine how much further lifting needs to be done.

Keep in mind, the Fed doesn’t meet again until March 21-22, meaning almost two more months of data before the next interest rate decision. Bears on the other hand are pointing to language in the Fed’s policy statement that highlights the same ongoing inflationary factors of “modest growth in spending and production,” “robust” job gains, and a low unemployment rate.

Those “negatives” were also reinforced by employment data yesterday that showed the number of available jobs in December shot back above +11 million, up from 10.4 million the previous month. It was the largest gain in new jobs since July 2021. Bears also point to Powell’s insistence that the Fed has “a lot of work left to do,” which they take to mean that the central bank will follow through on lifting rates to its projected target of around +5% and hold them there indefinitely if need be to battle inflation.

It’s also worth noting that the policy decision was unanimous, indicating that not even the most dovish Fed officials think the inflation fight has gone far enough.

The Bank of England and the European Central Bank announce their policy decisions today which could impact US investor sentiment if either starts talking about ending rate hikes. Key US economic data due today includes Productivity and Costs and Factory Orders.

Data to watch

The main highlight today will be big tech earnings with Alphabet, Amazon, and Apple all scheduled to report after markets close this afternoon. Many tech bulls are nervous that poor results from one or more of these behemoths could quash the optimism that has recently helped boost the tech sector. Somewhat surprisingly, Meta is providing a bit of optimism after reporting better-than-expected results, including a +4% increase in daily active users.

Keep in mind Meta stock has doubled over the last three months. Beyond big tech, earnings are due today from Bristol Myers Squibb, CNH, ConocoPhillips, Deckers Outdoor, Eli Lilly, Ferrari, Gilead Sciences, Harley Davidson, The Hartford, Hershey, Honeywell, Merck & Co., Qualcomm, Shell, Skechers, SnapOn, Stanley Black & Decker, Starbucks, and Trane.

Fed’s Policy Statement. Trifecta of Big Tech Earnings


(2023) Disappointing Earnings vs Dovish Central Bank Talks

Disappointing Earnings vs Dovish Central Bank Talks

Stock investors could be in for a rocky end to the week after a disappointing number from Apple and a couple of others. At the same time, bulls are hoping more dovish central bank talk will overshadow those let downs.


Reporting after markets closed yesterday, Apple and Google-parent Alphabet both missed on earnings and revenue. Notably, Apple’s overall sales for the holiday quarter were about -5% lower than last year’s, the first year-over-year sales decline since 2019. Meanwhile, Alphabet and its YouTube segment are suffering from the widespread decline in ad sales similar to other social media businesses like Snap. Amazon fared a bit better with Q4 revenue that exceeded Wall Street expectations but the company fell short on its forward guidance.

It’s worth noting that Amazon’s online store sales declined by -2% versus last year, indicating a weaker consumer. However, its advertising revenue surprised with a nearly +20% jump, bucking the trend of other online ad companies. Overall, tech earnings in Q4 have been underwhelming, a big change from quarters past when the sector’s profits reliably soared by double digits. The sector’s stock price gains have also outperformed the broader market for the past decade or so with investors willing to pay a premium price for future growth.

As of January 2023, the technology sector traded at 20.5 times forward earnings. By comparison, the energy and financial sectors had forward price-to-earnings ratios of 8.1 and 12.9, respectively. Bottom line, that math gets less attractive the lower tech’s profits fall and the higher interest rates climb. Cigna, Regeneron, and Sanofi report results today.

Data to watch 

Earnings on tap next week include Activision Blizzard, IDEXX Laboratories, Loews, ON Semiconductor, Simon Property Group, and Tyson Foods on Monday; AGCO, BP, Carlyle Group, Centene, Chipotle, DuPont de Nemours, Enphase Energy, Gartner, KKR & Co., Prudential Financial, Royal Caribbean, and Xylem on Tuesday; Avalon Bay, CME Group, CVS, Disney, Dominion Energy, Emerson Electric, MGM Resorts, O’Reilly Automotive, Penske Automotive, Robinhood, Uber, and Yum Brands on Wednesday; AbbVie, AstraZeneca, Cloudflare, Duke Energy, Expedia, Hilton Worldwide, Kellogg’s, PayPal, PepsiCo, Siemens, S&P Global, TotalEnergies, and Unilever on Thursday; and Enbridge and Fortis on Friday.

On the central bank front, the Bank of England (BoE) and European Central Bank (ECB) both hiked interest rates by 50-basis points yesterday and both indicated at least one more rate hike to come.

While the ECB left the door open to rate hikes beyond the March meeting, the BoE made changes to its policy language that leads some to believe that BoE officials are laying the groundwork to pause their hiking cycle. Bulls see the decision as more evidence that the era of global tightening is nearing an end and think the US Fed will lead the way as soon as the second quarter.

Bulls hope to find more support for that argument in today’s jobs data with the January Employment Situation expected to show payroll growth pulling back to +185,000 from +223,000 in December.

Importantly, investors will be scrutinizing the hourly wage gains component with consensus expecting the year-over-year increase to slow to +4.4% from +4.6% previously. The ISM Services Index is also out today.

Next week, data is pretty light with Consumer Credit and the Trade Balance on Tuesday; Wholesale Inventories on Wednesday; and Consumer Sentiment on Friday.

Disappointing Earnings vs Dovish Central Bank Talks