The U.S. stock market put in a weak performance last year, and investors are likely hoping for a better showing in 2023. The equity futures have been trading higher earlier this morning, which might signal a constructive start to the first session of the year. In addition, the markets overseas have made some progress overnight, reflecting optimism that relaxed COVID-19 restrictions in China may lift the global economy.
In economic news, this morning should be relatively quiet, however a few notable reports will be released in the days ahead. Tomorrow, the ISM (Institute for Supply Management) Manufacturing Index for the month of December will be published. A reading of 48.5% is widely expected for this past month, which would suggest that the manufacturing economy is starting to contract. (For perspective, the index was sitting closer to 60 about a year ago, which was a much stronger number). In addition, we will get a look at the minutes from the Federal Open Market Committee's most-recent monetary policy meeting. Investors will be dissecting the views expressed at this December session, as it can provide insight into the central bank's decision making process and perhaps its intentions.
At the end of the week, the employment situation will be at the center of attention. On Friday, the government will post the December employment report. Most economists expect that roughly 180,000 jobs were added to the economy during the month, while the unemployment rate remained unchanged at the 3.7% mark. Investors will likely want to see if average annual earnings have softened, as upward pressure on wages has been fueling inflation. The employment report is regarded as one of the more important economic items, and many traders may position portfolios ahead of this release, based on their expectations.
In corporate news, today will be quite uneventful, with few notable corporate reports scheduled. Later this week will hear from Constellation Brands (STZ) and Walgreens Boots Alliance (WBA). Now that the fourth quarter has closed, investors will be looking to see if companies pre-announce results or temper guidance before the official earnings season starts. As corporations post their full-year results, the focus will turn to the outlook for 2023. Clearly, these reports will influence the market's direction as the year gets started.
From a technical perspective, the stock market spent the last days of December in a trading range just above the 3,800 mark (looking at the S&P 500 index of stocks). Looking ahead, it remains to be seen if the bulls can regain control over the market. Pushing stocks back above the 50-day moving average, situated near the 3,900 area, will likely be the next key technical challenge for the bullish crowd. - Adam Rosner
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
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