The U.S. stock market may put in a soft performance this morning, as traders digest last Friday’s selloff. Overnight, the global markets have been losing ground, and closer to home, equity futures have been moving lower in pre-market trading. This week, investors will again turn their attention to corporate profits, as the fourth-quarter earnings season continues to unfold. As always, the economic news will also be closely followed.
There are no major economic reports slated for today. However, tomorrow, Federal Reserve Chairman, Jerome Powell, will deliver remarks at an economic event in Washington D.C. There is little doubt that the Wall Street community will be present at this gathering, and paying close attention to the proceedings. Last week, the central bank hiked interest rates by just 25 basis points, as most analysts had expected. This development, along with some encouraging commentary, had traders speculating that the Fed’s push to tighten monetary policy might soon draw to a close. Needless to say, the unusually strong January employment numbers published last Friday had investors thinking otherwise. Tomorrow, we will also get a look at the trade balance figures for the month of December, along with a report on consumer credit.
In corporate news, roughly 50% of the corporations in the S&P 500 Index have already delivered fourth-quarter reports. For the most part, the numbers have been unimpressive. Looking ahead, there are still many high-profile companies that have yet to release results. In addition, many dynamic small and midsized corporations will be entering the lineup. After the market closes today, we will hear from Activision Blizzard (ATVI), a developer of digital games, and Simon Property Group (SPG), a large retail REIT. Tomorrow, DuPont de Nemours (DD) and Chipotle Mexican Grill (CMG) will weigh in with their results.
From a technical vantage point, the S&P 500 Index has climbed about 8% year to date, which is an impressive feat. For the first time in several months, the broader equity average has managed to meaningfully climb above its 200-day moving average (situated near 3,950). Clearing this key technical hurdle is widely viewed as a positive development by traders. However, it remains to be seen if the current rally can continue, or if a pullback might be in order. Clearly, the selloff that took place last Friday was alarming, and some investors may become more cautious, given the current environment. In addition, it should be mentioned that the broader market is now trading at a price-to- earnings multiple of roughly 17, which may seem unjustified if too many corporations provide disappointing numbers and offer lackluster guidance. – 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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