Apple earnings, Fed meeting drive stocks next week
The January market rally faces a major test in the coming week from multiple key events, the most important of which might be the Fed’s rate announcement and press conference. The Fed’s meeting on Tuesday and Wednesday comes amid a flood of corporate earnings reports, with 20% of the S&P 500 reported that week. The most important day for earnings is Thursday, when Apple, Alphabet and Amazon report after the bell. There is also important economic data with the Employment Cost Index released on Tuesday and the January Payrolls report due on Tuesday and Friday. Both will be watched for signs of how much the central bank will calm the labor market by raising interest rates. This may provide some rough guidance on how far the Fed will seek to raise interest rates. “The markets are at an inflection point,” said Keith Lerner, chief investment officer at Truist Advisory Services. “I think it’s going to be a crucial week. We’re still on the defensive, but there are a lot of important data points that could turn this market around.” Stocks have rallied since the start of the year, with the most battered names outperforming. Two big losing sectors in 2022, technology and telecom services, have led the market higher and are on track for double-digit gains this month. The Nasdaq Composite was up 11% for the month as of Friday afternoon, ahead of a 6.5% rally in the S&P 500. Traders were watching the S&P 500 near the key threshold of 4100, its highest from December. The index closed at 4,070 on Friday, up 2.5% for the week. .SPX 1Y line s and p “We’re at the upper end of this trend line. Either we’re going to break out in a convincing way, or we’re going to pull back,” Lerner said. “We’re going to get what this market cares about the most – the Fed and earnings.” Earnings to date are beating expectations by about 68%, according to Refinitiv, but some of the guidance has been troubling. Art Hogan, chief market strategist at B.V. He said that Apple, which has the largest market capitalization, has the potential to turn the market around one way or another. “You have a company that sold very quickly at the beginning of the year to $125, and now it’s close to $150. It’s not priced for perfection, but it’s priced for better news and a win and a raise,” Hogan said. “If there’s one company with the potential to disrupt the apple cart, it’s the one pun intended.” AAPL 1Y line apple Apple is also important because of the signals it can send about consumer strength, supply chains, and reopening China. The Fed’s Future The Federal Reserve is widely expected to raise interest rates by a quarter point Wednesday afternoon, though no further changes are expected to its forecasts or projections. The Fed has raised interest rates seven times since last March, and its target interest rate range for federal funds is now from 4.25% to 4.5%. “At this point in time, they still have to double in size,” said Diane Sunk, chief economist at KPMG. “The Fed is in the uncomfortable position of sticking to its extremes even if it is debating internally what additional restrictive territory is, how far to go.” It’s unlikely that Fed Chairman Jerome Powell will speak definitively about slowing rate hikes, Sonck said, though markets still expect policymakers to pause soon and even cut rates by the end of the year. “For now, we’ve moved into restricted territory,” said Sonek. “The risk they fear is a repeat of 2021… where their heads are rigged and hyperinflation is starting to pick up again.” And she expects that the internal debate will intensify in March about the extent to which the central bank will extend its increases. By then, it should have more insight into whether inflation is really slowing and whether the job market is weakening. The Fed expects the unemployment rate to rise which may lead to a cooling of the economy and inflation. “They can’t signal that they’re reversing unless we make a more definite move in inflation, and we come down quickly,” Sonk said. “Job data is important, ECI [employment costs] It is important. … consumer weakness in the fourth quarter. The downward revision in consumer spending, which set the stage for weaker growth in the first quarter. Sonck expects slower job growth for January, but said the employment report still showed about 200,000 jobs created due to hoarding by companies that struggled with time finding workers. “The jobs report is in a precarious position where it needs to be. Worse,” Hogan said. He said that even though the payroll data comes after the Fed meeting, the market will be watching for signs of labor market weakness and an opportunity for the central bank to start positioning to end the oil drilling cycle. It consists of OPEC, Russia and other non-OPEC producers. “I don’t think they will do anything. They’ll say they’re monitoring the situation,” said John Kilduff, partner with Again Capital. “What’s going on behind the scenes could be more interesting,” he said. If something comes out of the pool, it would be panic about Russia and all the cheap oil they sell to India and China.” But he doubts there will be any public comments about it. The EU has cut off purchases of Russian seaborne oil, but it still Finds ways to enter the global market at discounted prices.Oil prices have been rising recently in part on expectations that China’s reopening will boost demand.But WTI futures are down 1% since the beginning of the year and settled at $79.68 per barrel on Friday.Next calendar week Monday Earnings: Whirlpool, Helmerich & Payne, Franklin Resources, Ryanair, NXP Semiconductors, SoFi, Canon, Samsung Tuesday Earnings: Caterpillar, Exxon Mobil, Amgen, General Motors, UPS, McDonald’s, Pfizer, PulteGroup, Electronic Arts, Advanced Micro Devices Snap, Marathon Petroleum, International Paper, Moody’s, Corning, Manpower, Sysco, Stryker, Boston Properties, Oshkosh, Polaris, Spotify, Edwards Lifesciences, Canadian Pacific Railway, Match Group, Chubb, Mondelez, Owens-Illinois, MSCI, Phillips 66, Hawaiian Holdings, Western Digital FOMC starts at 8:30 a.m. Employment Cost Index (4Q) 9:00 a.m. S&P/Case-Shiller Home Prices ( Nov) 9:00 a.m. FHFA Home Prices (Nov) 9:45 a.m. Chicago PMI (Jan) 10:00 a.m. Consumer Confidence (Jan) 10:00 a.m. Housing Vacancies (4Q) Wednesday Earnings: Meta Platforms, Novartis , T-Mobile US, Altria, GlaxoSmithKline, Peloton Interactive, Boston Scientific, Scotts Miracle-Gro, Waste Management, Netgear, Aflac, McKesson, TrueBlue, MetLife, Allstate, SLM, AmerisourceBergen, Brinker, Otis Worldwide, Thermo Fisher, Aflac, Qorvo, Johnson Controls Vehicle sales (Jan) 8:15 AM Employment ADP (Jan) 9:45 AM S&P Global Manufacturing PMI (Janua ry final) 10:00 AM ISM Manufacturing (Jan) 10:00 AM Construction Spending 10 :00 AM JOLTS (Dec) 2:00 PM FOMC Statement 2:30 PM Fed Chairman Jerome Powell’s Thursday Earnings Briefing: Apple, Alphabet, Amazon, Ford, Eli Lilly, Merck, Bristol Myers Squibb, ConocoPhillips, Intercontinental Exchange, Qualcomm, Starbucks, Gilead Sciences, Clorox, Harley-Davidson, Honeywell, Estee Lauder, Skechers, US Steel, Post Holdings, Cirrus Logic, Hartford Financial, Boyd Gaming, Shell, Air Products, Ball Corp., Tradeweb, Illinois Tool Works, Synaptics, Beazer Homes, Parker Hannifin, Canada Goose, Quest Diagnostics, Stanley Black & Decker, Lazard , Cardinal Health, Deckers Outdoor, GoPro 8:30am Initial Unemployment Claims 8:30am Productivity and Costs 10:00am Factory Orders Friday Earnings: Cigna, Aon, Church & Dwight, CBOE Global Markets, Regeneron Pharma, Sanofi, Zimmer Biomet and LyondellBasell 8:30 AM Recruitment (January) 9:45 AM S&P Global Services PMI (January Final) 10:00 AM ISM Services (January January)