The futures markets are trading well into the green this morning, showing some recovery from yesterday’s lackluster trading session. Following the three-day New Year’s holiday weekend, the indices fell yesterday as some weaker economic news hit the tape, including the S&P Global U.S. Manufacturing Purchasing Managers’ Index, which showed a contraction (down to 46.2 from 47.7) in factory activity during December. Underwhelming stock performance from a few large-cap stocks also dragged the indices lower, including big drops in Apple (AAPL) and Tesla (TSLA), as traders fear declining demand for their products in China. Overall, the S&P 500 finished down 15 points, the NASDAQ was off 80 points, and the Dow Jones Industrial Average dropped 11 points.
Later today, several economic reports will be released that will likely impact the trading session, including the Institute for Supply Management’s Manufacturing Index, and the U.S. Bureau of Labor Statistics data on job openings and quits. The Federal Reserve will also release the minutes from its December monetary policy meeting, giving investors some insight into the timing of future interest rate moves.
Despite the downward move in the indices yesterday, advancers outpaced decliners by a 1.5-to-1.0 ratio. Communications stocks were among the best performers, likely benefiting from portfolio rebalancing, as the sector was one of the worst performers over the past twelve months. On the other hand, energy issues were among the weakest, hurt by a decline in the related commodities and some likely portfolio rebalancing, given the outperformance by this sector in 2022.
In commodity news, oil prices declined a bit yesterday as news of an increase in O.P.E.C. (Organization of the Petroleum Exporting Countries) production hit the market. Agricultural commodities fell in price, but precious metals, such as gold and silver, jumped higher. Elsewhere, U.S. Treasury bond yields were a mixed bag, with short-term rates rising and long-term rates falling – accentuating the long-running “inversion” of rates in that market. The Chicago Board Options Exchange Volatility Index, or VIX, rose as demand for options protection increased.
Several economic reports will be released in the days ahead. These include initial jobless claims and the S&P Global U.S. Services Purchasing Managers’ Index on Thursday. On Friday, The unemployment rate for December and nonfarm payrolls are on the docket. Additionally, several regional Federal Reserve Presidents will give remarks on the economy. Several dozen companies will report quarterly results in the days ahead, including Dow-30 component Walgreens Boots Alliance (WBA). Overall, we think that most eyes will be on the release of the Fed minutes later today, along with the clarifying remarks given by the regional Fed officials in the coming days. - 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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