The futures market is in the red this morning following a slew of earnings data from large technology companies after the closing bell yesterday. Microsoft (MSFT), the world’s biggest software provider, and Alphabet (GOOG), the parent company of search engine giant Google, both beat expectations on the top and bottom lines. Nevertheless, both names sold off as some profit taking occurred. The Dow Jones Industrial Average futures had been up earlier as major component Boeing (BA), the world’s largest aircraft manufacturer, beat expectations for earnings; the aerospace firm suspended its guidance due to an accident that occurred this month involving a 737 MAX 9 plane. The ADP Payroll (ADP) report also came out before the open, and showed that private sector job growth slowed to 107,000 in January, which was lower than expected. These news stories suggest a sluggish start to the trading day as we await news from the Federal Reserve.
Later today, the central bank’s Federal Open Market Committee (FOMC) will release its latest interest-rate policy decision. Though most in the market expect that interest rates will be held steady, traders have been pricing in about even (50/50) odds of an interest-rate cut at the meeting in March and six cuts by the end of December. The expectation of lower interest rates has been a key impetus in the recent bull run. Investors will look at the release and the accompanying press conference from Fed chief Jerome Powell to glean any additional information about future interest rate policy. Overall, we think these developments and related economic data will have a major impact on trading in the weeks ahead. Trading yesterday was largely choppy and affected by several earnings results. Too, risks related to international trade and worries about economic slowdowns in China lead to uneven trading patterns. Overall, the S&P 500 fell three points (down 0.06%), and the NASDAQ declined 118 points (down 0.76%). However, the Dow Jones Industrial Average increased 134 points (up 0.35%). Market breadth did not favor the advancers or decliners by a large amount. Financial equities were among the best performers, while REITs were among the worst.
In commodity news, oil prices fell in the early portion of the morning but quickly rebounded when traders priced in escalating tensions in the Middle East. The U.S. government vowed to take “all necessary actions” to defend itself following an attack in Jordan. Elsewhere, U.S. Treasury bond yields were mixed, with short-term rates rising and long-term yields falling. The yield curve remains inverted, with short-term yields trading higher than those with longer durations. The Chicago Board Options Exchange Volatility Index, or VIX, commonly known as the fear index, fell yesterday as demand for options protection declined.
Several economic reports will be released in the coming days. These include initial jobless claims, U.S. fourth-quarter productivity, and the Institute for Supply Management’s Manufacturing Index on Thursday. On Friday, the U.S. nonfarm payrolls and the unemployment rate for January will be released by the Labor Department, showing how recent layoffs across a wide array of public companies may have affected the broader labor market. Elsewhere, several hundred companies will report earnings in the days ahead, including several of the largest companies by market cap. Apple (AAPL), Amazon (AMZN), Facebook parent Meta (META), Honeywell (HON), and Merck (MRK) are slated to report on Thursday, while results on Friday will be largely focused on diversified oil enterprises Exxon (XOM) and Chevron (CVX). All told, these reports should give ample insight into how companies are positioning themselves for 2024. - 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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