The U.S. stock market seems positioned for a soft start this morning, as traders return from a three-day holiday weekend. Specifically, the markets across Europe have been putting in a muted session, and on our shores the equity futures have come under pressure in early morning trading. Once again, investors seem concerned about the global economic outlook, inflationary challenges, rising interest rates, and corporate profits.
In economic news, today will be relatively quiet. However, a few notable reports are scheduled for tomorrow. Specifically, we will get a look at the retail sales numbers for the month of December. Many economists think this report will show that the consumer has grown more cautious, reflecting the uncertain economic environment. In addition, the Producer Price Index (PPI) for December will be released, and this item will be closely watched. Inflationary pressures, while persistent, do seem to be gradually easing. However, investors worry that the Federal Reserve is firmly set on hiking interest rates, and may be unwilling to wait for more data to be collected. Looking ahead, the Federal Open Market Committee (FOMC) will hold a meeting in a couple of weeks, and another interest-rate decision will be announced at that time.
In corporate news, the fourth-quarter earnings season has finally started. This morning, Goldman Sachs (GS) posted a weak report, and the stock is slumping in pre-market trading. However, Morgan Stanley (MS) posted better-than-expected results. Tomorrow, Charles Schwab (SCHW) will deliver its numbers. Traders will be paying close attention to the reports being presented during this critical earnings season. Not only will companies be wrapping up 2022, but most will provide guidance for 2023. Clearly, the environment has become more challenging, prompting numerous corporations to announce staff reductions and spending cuts. These actions, and fears of a possible recession, have created considerable confusion for investors, and some clarity would be helpful at this point.
From a technical perspective, stocks have been performing somewhat better lately. The gains achieved last week put the S&P 500 Index back at its 200-day moving average (located at the 3,980 mark). Pushing stocks beyond this key level would represent a major feat for the bulls. The numerous corporate profit reports coming out over the next few weeks will probably influence traders, as well as the direction of the market. – 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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