The futures markets are trading slightly higher following a strong day of trading in the stock market yesterday. Economic data releases are light today, but a top story affecting business is a Federal Aviation Administration system outage that has grounded flights across the United States. The government paused all domestic departures until 9 am, and though operations resumed, heavy delays are expected. Several airline stocks are trading slightly in the red on the news.
The stock market traded positively yesterday, benefiting from improved sentiment concerning a future pivot from the U.S. Federal Reserve to a slower pace of monetary tightening. Traders continue to look ahead toward data releases in the days ahead, speculating that they will show slowing inflation. Additionally, the market was buoyed by some comments from regional Fed presidents, including Atlanta Fed President Raphael Bostic stating that he was open to either a 25- or 50-basis point hike at the February meeting, suggesting that the Fed might taper interest-rate hikes. Overall, the markets were bid up early in the session, and the three major averages ended well in the green. The S&P 500 finished up 27 points, the NASDAQ rose 107 points, and the Dow Jones Industrial Average increased 186 points.
Advancers outpaced decliners by a 2.5-to-1.0 ratio. Communications stocks were among the best performers, while consumer staples were among the weakest.
In commodity news, oil prices largely held steady, as fears about a coming recession in the United States have offset improving demand forecasts from the reopening of the economy in China. Elsewhere, U.S. Treasury bond yields were mixed as short-term rates rose and long-term yields fell. The yield curve remains heavily inverted, which can portend a coming recession. The Chicago Board Options Exchange Volatility Index, or VIX, fell sharply as demand for options protection waned.
Several economic releases and earnings reports will be released in the days ahead. These include the Thursday issuance of the U.S. Bureau of Labor Statistics Core and Non-Core Consumer Price Indices for December. Several U.S. Federal Reserve regional presidents will be giving remarks that day, as well. These will provide insight into inputs that will help determine future Federal Reserve interest-rate policy. Elsewhere, the University of Michigan Consumer Sentiment Index is slated for release on Friday, which includes inflation expectations over the coming year. The earnings season begins later this week, with several large banks and other companies reporting quarterly results and guidance for 2023. This includes Dow-30 components JPMorgan Chase (JPM) and UnitedHealth (UNH). Overall, we expect most eyes to be focused on the inflationary data before pivoting to earnings forecasts for 2023. - John E. Seibert III
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
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