The futures markets were little changed this morning even with the S&P 500 Index reaching an all-time high above the 5,000 level last Friday. This positive move marked the fifth-straight week of higher price action. Hundreds of companies are reporting this morning and after the close. Consolidation in the oil space continues as Diamondback Energy (FANG), a large shale producer, reached a deal to purchase the largest private oil and gas producer, Endeavor Energy Resources, L.P., for $26 billion in a cash-and-stock transaction. Overall, these factors suggest an uneven start to the trading day. Federal Reserve Governor Michelle Bowman and Minneapolis Fed President Neel Kashkari will give remarks on the economy and the central bank’s interest-rate policy later today, which may affect trading.
In marketing news, during last night’s Super Bowl LVIII, as the Kansas City Chiefs defeated the San Francisco 49ers in overtime by a final score of 25-22, Several large consumer staples companies, such as PepsiCo, Inc. (PEP), spent an average of around $7 million for a 30-second commercial slot, which is a positive development for advertising agencies and Paramount Global (PARA), which broadcast the game. We pay less attention to the so-called Super Bowl indicator which states that when the AFC (American Football Conference) representative wins, a bear market will ensue in the coming twelve months.
The market was strong last Friday as a rise in mega-cap technology issues, such as NVidia (NVDA), Amazon (AMZN), and Microsoft (MSFT), part of a group commonly known as the “Magnificent Seven,” moved quickly higher in the early portion of the day. This helped the indices, which moved upward through much of the day before selling off a bit in the final portion of trading. Overall, the S&P 500 rose 29 points (up 0.57%), and the NASDAQ increased 197 points (up 1.25%). However, the Dow Jones Industrial Average finished down 55 points (up 0.14%), as its higher concentration of energy issues offset the gains elsewhere. Market breadth was very strong, with advancers outpacing decliners by a 2.0-to-1.0 ratio. Technology issues were among the best performers on Friday, while energy issues were among the weakest.
In commodity news, oil prices followed significant gains on Thursday with more-modest upward moves on Friday. Tensions in the Middle East have caused supply concerns to widen to a larger portion of the investment community. Elsewhere, U.S. Treasury bond yields were mostly higher on Friday as traders moved away from the safe-haven asset. Traders are still pricing in a lower chance of interest-rate cuts at the March Fed meeting, but are largely pricing in between four and five quarter-point cuts by the end of the year. The Chicago Board Options Exchange Volatility Index, or VIX, commonly known as the fear index, finished slightly higher on Friday, but remains not far from relative lows.
Several economic reports will be released in the coming days. These include the core- and non-core Consumer Price Indices (CPI) for January on Tuesday, the Empire State and Philadelphia Fed manufacturing surveys on Thursday, and core- and non-core Producer Price Indices (PPI) on Friday. A few regional Fed Presidents will also give remarks on the economy and interest rates. Elsewhere, several hundred companies will report quarterly results and share their outlook for the year ahead. - 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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