The U.S. stock market may run into some resistance this morning, as a new week on Wall Street begins. Overnight, the markets in Europe have been putting in a mixed session, and on our shores, the equity futures have been under pressure in early morning trading. Over the next few days, investors will be busy sifting through numerous corporate reports and several important economic releases.
Today should be quiet, with no major economic reports scheduled. However, there are two notable items set to come out later this week. Wednesday afternoon the Federal Open Market Committee (FOMC) will conclude its two-day meeting with an interest-rate decision and a press conference. Most analysts expect that a 25 basis point (a quarter of a percent) interest-rate hike will be approved, which would be smaller than the increase implemented in December. The tone of the central bank comments, which might shed light on the path forward, will be of the utmost importance. The Federal Reserve has stated that it aims to bring inflation down to 2%, as measured on the PCE (Personal Consumption Expenditures) Price Index. However, some analysts are wondering if the central bank might be flexible in this regard, especially if the economy is headed for a recession. Elsewhere, on Friday the government will publish the January employment report. The numbers are expected to show that roughly 190,000 jobs were added to the economy during the month (down from the December figure), while the unemployment rate hovered around the 3.6% mark. Investors will be closely looking at hourly wages to see if inflationary pressures in this category have been easing.
On the corporate front, the fourth-quarter earnings season is heating up. This week we will hear from many of the largest publicly traded companies, including Apple (AAPL), Alphabet (GOOG), and Amazon.com (AMZN). Although the fourth-quarter numbers will be scrutinized, the guidance provided for 2023 will be critical. For the most part, this earnings season has been weak, which is not too surprising. However, investors have shrugged off the disappointing news, possibly in anticipation of better results in the second half of the year.
From a technical perspective, the stock market has displayed considerable strength lately. Specifically, the S&P 500 Index has managed to break through its 200-day moving average (located at the 3,960 mark). This accomplishment may encourage the bulls and lift investor sentiment. It is also encouraging to see that the technology sector has started to show leadership over the past few weeks. Recent gains in the large technology stocks have clearly helped push the NASDAQ higher over the past month. – Adam Rosner
At the time of this article’s writing, the author had positions in Amazon.com (AMZN).
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