Market Update – Monday Morning Market Memo – January 30, 2022

Market Update – Monday Morning Market Memo – January 30, 2022

The major stock market averages posted solid gains last week – the Dow Jones Industrial Average rose 1.8% to 33,978 – the tech-heavy NASDAQ Composite jumped 4.3% to 11,622 (its fourth consecutive weekly gain) – while the Standard & Poor’s 500 Index added 2.5% to 4,071.  These advances were fueled by an increased optimism/belief that inflation can come down without a corresponding large increase in unemployment or a recession.

The Personal-Consumption-Expenditures price index (PCE), which is the Federal Reserve’s preferred inflation gauge, showed another monthly decline, which is good news on the inflation front.  The initial read on Gross Domestic Product, was also released last week – showing the U.S. economy grew at a stronger-than-expected 2.9% last quarter.  Also supporting stock prices, is an earnings season, that so far at least, is coming in better-than-feared.

According to data from FactSet: For the fourth quarter of 2022 (with 29% of S&P 500 companies reporting actual results) 69% of S&P 500 companies have reported a positive EPS (Earnings Per Share) surprise and 60% have reported a positive revenue surprise (both of which are below the 5-year and 10-year averages).  Looking to the week ahead, get ready for the heart of earnings season.  Large cap technology companies will take center stage, as AlphabetAmazon.comMeta Platforms, and Apple are all scheduled to report.  Away from tech, familiar names reporting include AmgenCaterpillarPfizerExxon MobilMcDonald’sFord MotorMerckUnited Parcel Service, and Quest Diagnostics.

As if these earnings weren’t enough for the week, markets will also have the January Jobs Report and a Federal Reserve monetary-policy-meeting to digest.  Expectations are the U.S. Department of Labor will report the economy added about 190,000 jobs last month and for the unemployment rate to tick up a notch to 3.6%.  The Federal Reserve is widely expected to raise interest rates ¼ percentage point on Wednesday.  More importantly, the market will be looking for clues/indications as to the future path of monetary policy.

Federal Reserve monetary policy, along with the current/future health of the U.S economy have been and continue to be primary forces driving stock market direction and magnitude.  In addition to those themes, we’ll add another primary factor to the picture – earnings reports.  Ultimately, profits are the mother’s milk of stock returns!

As always, please feel free to contact us with any questions, or if you would like to set up a meeting.

All the best – Southport Station Financial Management, LLC