The U.S. stock market may get off to a mixed start this morning, after last week’s difficult performance. In the days ahead, investors will receive a key inflation release, as well as a handful of earnings reports from some of the nation’s largest banks. As we were writing this piece, the S&P 500 Index futures were up slightly in pre-market trading. The NASDAQ futures were pointing nicely higher, but the Dow Jones Industrial Average was under pressure, due to weakness in Boeing (BA), following a serious incident with one of its 737 planes.
A number of economic reports will be released this week. However, the main event will take place on Thursday morning, when the latest month’s Consumer Price Index (CPI) will be published. (The Producer Price Index will follow on Friday.) Most analysts think the numbers will show that consumer prices rose roughly 3.3% in December (year over year), slightly higher than the figure logged in November. However, the core reading (excludes volatile food and energy items) is expected to show progress, confirming the thesis that inflation is gradually moving lower. The CPI report should be widely followed on Wall Street, as many investors now expect the Federal Reserve to lower interest rates in the months ahead.
In the corporate arena, a number of notable earnings reports are due out at the end of this week. On Friday, we will hear from JPMorgan Chase (JPM), Citigroup (C), Bank of America (BAC), and Wells Fargo (WFC). These releases will be closely followed on Wall Street, as they could set the tone for the fourth-quarter earnings season.
The stock market pulled back during the first week of 2024. However, many traders were probably not too surprised by this development, given the sizable gains achieved over the past couple of months. Looking ahead, it is not inconceivable that the broader index could soften further from here. Followers of technical systems might expect the market to retest and hopefully find support at its 50-day moving average (located near the 4,540 level). From a sector perspective, over the past week capital rotation has been taking place on Wall Street. Specifically, investors have been taking a renewed interest in dividend-yielding stocks, like healthcare equities and utilities. In contrast, the technology sector, which displayed leadership last year, has fallen out of favor, at least temporarily. To some extent, this development may prove constructive, as it can allow traders to reallocate their capital, while still providing some support for 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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