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Monday, January 30, 2023
Today’s newsletter is over Brian Sozzian editor-in-chief and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn. Read this and more market news on the go with the Yahoo Finance app.
The markets are off the grid this year, making this a bizarre time to be an investor.
Bizarre especially as stocks are making gains (see Tesla up 44% YTD), yet Corporate America’s opinion couldn’t be more different than what the stock market is saying right now.
Sure, the old saying on Wall Street is that stocks often “climb on a wall of worry.” And maybe that will happen in January. But honestly, is anyone paying attention to the economic data (apart from inflation) or the ongoing earnings season?
“Yield curve inversion, contracting M2 and PMIs, soft homebuilder and truck surveys, and falling leading economic indicators are all puzzling to [Federal Reserve Chairman] Jay Powell,” Julian Emanuel of Evercore ISI recently noted. [meeting] on 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, which is lower than the five-year average of 77%.
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S&P 500 companies outperform fourth-quarter EPS estimates by 1.5% overall, which is below the five-year average of 8.6%.
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The mixed earnings decline for the fourth quarter for the S&P 500 is -5.0%. If -5.0% is the actual decline for the quarter, this would be the first year-over-year decline reported by the index since Q3 2020.
Miserable reads about the health of Corporate America. Guidance was also generally poor: just look at the meager forecasts from 3M and Sherwin-Williams last week.
Anecdotally, execs sound rather bearish to me in our chats.
Intel CEO Pat Gelsinger made a gloomy comment about the economy in 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 downturn in the economy.
In addition, we are seeing signs of layoffs spreading beyond technology.
Some 219 companies laid off more than 68,000 tech workers this month, according to the website Layoffs.fyi. That is 68,000 people who may contribute less to economic growth in the coming months. And then there is Newell Rubbermaid, for example, who is laying off 13% of its office staff.
Now the market is waiting to see if Apple, which reports earnings later this week, will join its rivals Microsoft and Amazon in making cuts amid what appears to be a slowdown in iPhone demand.
But who knows, Apple’s cuts could only fuel the current market.
A bizarre moment in time for investors. We’ll see what February brings.
Have fun trading!
What to watch today
Economy
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10:30 a.m. ET: Dallas Fed manufacturing activityJanuary (-15.0 expected, -18.8 in last month)
Revenue
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Real estate stocks in Alexandria (ARE), GE Healthcare (GEHC), Helmerich & Payne (HP), J&J Snack Foods (JJSF), Phillips (PHG), SoFi technologies (SOFI), Whirlpool (WHR)
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