Broker Check


| January 30, 2023
The Week On Wall Street
Stocks added to their early 2023 gains amid a busy stream of mixed corporate earnings results and conflicting economic data. The Dow Jones Industrial Average gained 1.81%, while the Standard & Poor’s 500 added 2.47%. The Nasdaq Composite index rose 4.32% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, increased by 1.14%.
Stocks Advance
With the backdrop of earnings reports and conflicting economic data, stocks climbed higher on cooling inflation, continued economic resilience, and fourth-quarter corporate earnings results that, while underwhelming, did not appear as bad as many had feared. There was enough new economic data to support both the “recession is coming” and the “soft landing” camps. It was corporate results and continued labor market strength, along with a solid, if weakening, fourth-quarter Gross Domestic Product (GDP) growth number, however, that raised investors’ hopes that a potential recession may be mild and likely pushed out to later in the year.
GDP Report
The U.S. economy expanded at a 2.9% annualized rate in the fourth quarter, slightly exceeding consensus estimates of 2.8% but down from the third quarter’s 3.2% growth rate. Consumer spending, which accounts for over two-thirds of GDP, rose 2.1%. Increases in private inventory investment, government spending, and nonresidential fixed investment also contributed to the fourth quarter’s growth. Weakness in housing and a drop in exports subtracted from the quarter’s result. Beneath the headline number, the personal consumption expenditures price index (the Fed’s preferred measure of inflation) rose 3.2%. That was lower than the third quarter’s 4.8% increase, though it remains above the Fed’s 2% inflation target rate.
This Week: Key Economic Data
Wednesday: Federal Open Market Committee Announcement. Job Openings and Turnover Survey (JOLTS). Institute for Supply Management (ISM) Manufacturing Index. Automated Data Processing (ADP) Employment Report.
Thursday: Factory Orders. Jobless Claims. 
Friday: Employment Situation. Institute for Supply Management (ISM) Services Index. 
This Week: Notable Companies Reporting Earnings

Final Thoughts
109 companies are reporting earnings this week.  Roughly 20% of the S&P500. Buckle up.  This week will be data rich to say the least.  The Fed announces another rate hike Wednesday afternoon at 2pm, but the real news happens from 2:30pm to 3:30pm when Jay Powell speaks to reporters.  He's going to talk tough.  He has to talk tough.  They're winning the battle against inflation and need to keep it on the run, thus the gritty talk.  Jobs and wage inflation are their biggest enemy now. Layoffs, especially in tech, are increasing as companies brace for the most anticipated recession that hasn't happened yet.  GDP was positive in the 4th quarter and it is hard to have a recession with positive GDP.

So, back to corporate earnings.  Of the 145 companies that have reported earnings this quarter so far (29% of the S&P 500), overall earnings results are beating estimates by a median of 5%, and 68% of those reporting are beating estimates. On the top line, overall results are beating estimates by a median of 3%, and 60% of those reporting are beating estimates. You read that right, so far more than half are beating their earnings expectations.  There some high profile companies reporting their earnings this week, Amazon, Apple and Google just to name a few.  Like I said above, buckle up.  The market seems to have a bias to the upside at the moment, but wherever we are going won't be in a straight line.  For long term investors this is all just noise, but I realize we're living in the now and it is sometimes hard to focus on the long game.  That is what we are here for.  Great businesses tend to continue being great businesses and will reward those who stay the course.  Stay tuned and make it a great week!