The U.S. stock market appears to be headed for a weak start this morning, as the month of January draws to a close. The equity market futures are lower by about 15 points, which indicates some downward pressure at the opening bell. Investors will probably be focusing on many of the same concerns that have dominated the conversation lately, including the coronavirus pandemic, supply-chain disruptions, persistent labor shortages, rising inflation, a less accommodative Federal Reserve, and military tensions between Russia and Ukraine. In addition, the fourth-quarter earnings season will remain in the spotlight for the next couple of weeks, which may add to the volatility.
In economic news, the next couple of days should be relatively quiet. Today, we get a look at the Chicago Purchasing Managers’ Index (PMI) for the month of January. Tomorrow, the Institute for Supply Management (ISM) Manufacturing Index will be released, along with the latest monthly construction spending numbers. The big news, however, will come at the end of the week, when the government releases the January Employment report. This issuance will be of the utmost importance, as the nation’s employment situation is closely monitored by the Federal Reserve and impacts monetary policy. Last week, the central bank concluded its two-day meeting, leaving interest rates unchanged, but there were clear indications that rates would be moving higher in the coming months. While this information should not have come as a surprise, some traders seemed to have difficulty digesting the news.
Meanwhile, the fourth-quarter earnings season is well underway. Although quite a few corporations have delivered respectable results, Wall Street has been less than impressed. Today, we will hear from NXP Semiconductors (NXPI) and Cirrus Logic (CRUS). Tomorrow, General Motors (GM), Alphabet (GOOG), Starbucks (SBUX), and Exxon Mobil (XOM) will weigh in with their reports.
On a technical level, the stock market began selling off in early January and spent much of the month in a downward trajectory. Last Monday, the broad index fell dramatically in the morning, but reversed course to recover considerable ground in the afternoon. Some traders view this display of resilience as a sign that the market could be stabilizing, although it remains to be seen if this is indeed the case. Many speculative issues have come down in price over the past several weeks, and valuations appear more reasonable. Nonetheless, given the current climate, investors may be cautious about deploying capital, and it may take a while before sentiment turns bullish.
– Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
