The S&P 500 ($SPX) (SPY) finished January up over 6%, which was a nice change of pace from the total return of 2022. Earnings continued to be mixed throughout last week. The Fed bumped rates in line with the expected 0.25%, and aside from a reactionary drop the market rallied through the end of Wednesday.
The Dow Jones Industrials Index ($DOWI) (DIA) was down 0.15% for the week but +2.38% for the month while the Nasdaq 100 Index ($IUXX) (QQQ) was 3.34% higher on the week and a whopping +15.75% for the month.
This upcoming week will hardly be as exciting as a Rate decision week, but there are still many important items to watch. Here are 5 things to watch this week in the market.
Earnings
Earnings will remain an important part of the market, especially if you trade individual stocks. Some of the big hitters this week include Uber (UBER), CVS Corp (CVS), Disney (DIS) and the CME Group (CME) on Wednesday. PayPal (PYPL), Expedia (EXPE) and AbbVie (ABBV) report on Thursday. We are still in the thick of earnings season so this will be a constant theme for a few more weeks to come.
Fed Chair Powell
Tuesday at Noon Eastern time Fed Chain Powell will be speaking at the Economic Club of Washington. While he may not directly be talking to the markets in the form of a press conference, markets usually react whenever he talks. I would be looking for any forward indication during the speech that rate increases will need to be more or less aggressive, and for him to mention any potential top for short-term rates. Such information may move the markets.
10 Year bond Auction
This is not a usual topic discussed in the weekly themes, but with the market seeming to have adjusted to rate hikes, the 10-year auction could be telling how much return investors are seeking on “Safe” assets like treasuries. Bond auctions usually are telling about how much risk larger investors see in the market. If there is a high bid-to-cover ratio and the highest rate required is at or below the fed funds rate it can be implied that investors don’t see much innate risk. If the Bid to Cover is low and the required rate is higher than anticipated then it could be implied that large investors see some continued risk in the markets and economy.
UoM Sentiment
The University of Michigan Sentiment is basically a consumer confidence number. This will be released Friday at 10 am eastern. As has been a theme in the past with Sentiment numbers, it's possible that this does not directly move the market but is more of an indicator of what could be coming in future months. Usually stronger than expected is good for the market over the medium term and the opposite is true for weaker than expected.
The Weather/Energy Prices
This theme is more on a macro level. Energy prices have started to rise again in the US, and in many places around the world, they never stopped. With some record cold potentially on the way in the EU and in the US in the coming week(s) it's possible that energy could squeeze. It is possible that it moves over into equities in the coming months as people need to devote more income to heat and power bills. Much like the end of last year, it is possible energy prices puts negative pressure on the market.
Best of luck this week and don’t forget to check out my daily options article.
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On the date of publication, Gavin McMaster did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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