January Ends Amid Flurry Of Earnings, Economic And Fed News

NASDAQ futures are down 1.0% and S&P futures are down 0.4%, adding to yesterday’s respective losses of 0.75% and 0.1% as investors digest another round of overnight earnings from US mega cap stocks. Once again the prevailing theme has been one of companies beating expectations on earnings but missing on sales, guidance or some other troubling metric that has often given investors an excuse to head for the doors. Premarket action in some of the most notable companies reporting results includes Alphabet down 5.2%, Microsoft* down 0.2%, Advanced Micro Devices* down 4.7%, Boeing up 2.0%, Mastercard down 0.6%, and Starbucks up 4.7%. Canadian Pacific beat the street and is up 2.1% in US premarket action. Qualcomm and MetLife report after the close today, followed by Merck and Honeywell tomorrow morning.   

The US 10-year treasury note yield is holding just above 4.00% awaiting this afternoon’s Fed Decision and statement on monetary policy and the economy. After taking a dovish tone at their December meeting, Fed officials have been trying to walk the tone back toward neutral this month. The big question for today is whether the Fed is thinking about starting to cut interest rates in March as market prices have been suggesting, or if it intends to keep rates higher for longer. Investors may also look for indications of whether the Fed is ready to taper or end normalizing its balance sheet (Quantitative Tightening) or not.

Ahead of the Fed, economic news continues to roll out. US ADP Payrolls (107K vs street 145K and previous 164K) were worse than expected, reminding investors that if the Fed does move up rate cuts to March, it would more likely be due to a weakening economy than victory over inflation. US Chicago PMI (street 48.0) is due at 10:00 am EST. Canada GDP for November (0.2% vs street 0.1%) beat expectations.  Tomorrow brings Manufacturing PMI reports from around the world and US Construction spending, followed by Nonfarm Payrolls on Friday.  

Although Chinese Manufacturing PMI and Non-Manufacturing PMI numbers were in-line or slightly ahead of expectations, China sensitive markets have remained under pressure overnight. Hong Kong and Shanghai lost 1.4%-1.5%, while Copper is down 0.2%. Gold is up 0.25% today, while cryptocurrencies like Bitcoin and Ethereum are down 2.6% and 3.3% respectively, suggesting that investor sentiment is becoming more conservative.

WTI and Brent Crude Oil are down 1.1%-1.3% this morning, despite a larger than expected 2.5 mmbbl drawdown in US weekly API oil inventories overnight. This suggests that concerns about China demand may be weighing on oil as well. Oil may remain active over the next 24 hours with US DOE oil inventories due at 10:30 am EST today and OPEC+ meeting tomorrow.

*Shares of Microsoft and Advanced Micro Devices are held in portfolios managed by SIA Wealth Management.

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