Broker Check


| February 13, 2023
The Week On Wall Sreet
Stocks drifted lower as a week of mixed earnings reports and resurgent worries over Fed monetary policy dragged on investor sentiment.  The Dow Jones Industrial Average slipped 0.17%, while the Standard & Poor’s 500 declined 1.11%. The Nasdaq Composite index lost 2.41%. The MSCI EAFE index, which tracks developed overseas stock markets, dipped 0.30%.
Rally Stalls
Stocks struggled last week, weighed down by rising bond yields, a firming U.S. dollar, geopolitical tensions, and generally unimpressive corporate earnings reports. Perhaps the most consequential overhang was the potential direction of monetary policy.  Initially, traders were relieved by comments made by Fed Chair Jerome Powell earlier in the week that he had not struck a more aggressive tone following the strong employment report released after the Federal Open Market Committee (FOMC) meeting. The relief was short-lived, however, as anxieties over future monetary policy resurfaced, exacerbated by comments by one Fed governor who suggested restrictive monetary policy would be necessary for a few years to tamp down inflation.
Powell Repeats Himself
Investors were particularly eager on Tuesday to hear Powell’s first comments following the strong employment report the previous Friday. The concern was that the surprise job number would change Powell’s outlook coming out of the last FOMC meeting. Powell instead repeated his post-FOMC meeting remarks, which were that a disinflationary trend was underway, and there remained a distance to travel before the measures taken tamed inflation. The Fed would be data-dependent in making future rate decisions. Powell also pointed out that the robust job growth showed why it might take so long to reduce inflation to the Fed’s target level.
This Week: Key Economic Data
Tuesday: Consumer Price Index (CPI).
Wednesday: Retail Sales.
Thursday: Jobless Claims. Producer Price Index (PPI). Housing Starts.
Friday: Index of Leading Economic Indicators.  
This Week: Notable Companies Reporting Earnings
Final Thoughts
60 companies are reporting earnings this week. Of the 347 companies that have reported so far (69% of the S&P 500), overall earnings results are beating estimates by a median of 6%, and 69% of those reporting are beating estimates. On the top line, overall results are beating estimates by a median of 4%, and 64% of those reporting are beating estimates.  So, in a nutshell, corporate earnings are doing okay.

Markets ran quite hard in January, so to see some kind of rest or pause in February seems realistic.  The big news for the month is CPI tomorrow morning which will let the Fed know where we are headed on inflation.  There have been some fears in the markets tomorrow's number could come in a little hot, meaning inflation may have ticked back up.  However, there are parts of the economy seeing deflation, so the idea that inflation is going to get out of control again in the present seems highly unlikely.  They don't say the market climbs a wall of worry for nothing.  The media is always looking for some shoe to drop, but tuning them out and staying invested has proven to be the best strategy for long-term investors.

Have a great week!