Stocks rose on Monday as traders rebounded after the S&P 500 and Nasdaq Composite suffered their worst weekly declines in nearly two months.
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The Dow Jones Industrial Average rose 291 points (0.86%). The S&P 500 Index rose 0.89% and the Nasdaq Index rose 1%.29%.
Microsoft and Salesforce led Dow’s growth, up 3.6% and 1.8% respectively. The technology sector is the most successful sector in the S&P 500, up more than 1%.
All three major indices are ending the week losing money.
Last week, the Dow fell 0.17%. Meanwhile, the S&P 500 was down 1.11% and the high-tech Nasdaq was down 2%. 41%, representing the largest weekly loss since December.
These actions come after Fed Chairman Jerome Powell said there was still a long way to go in the fight against inflation.
Powell also noted that if inflation figures do not ease, interest rates could rise more than the market expects, which will change the market’s initial optimism that rate hikes will ease soon.
Investors will receive additional data on inflation this week. On Tuesday, the CPI report for January will be released, which will show whether inflation continues to slow amid the central bank rate hike.
“The market is starting to sense that the very comforting disinflation story is more complex than we’d like it to be,” Mohamed El-Erian, chief economic advisor at Allianz.
The final leg of earnings season also continues this week, with Coca-Cola, Marriott, Cisco, Marathon and Paramount.
So far, companies have reported worse-than expected results, making this year the worst earnings season in more than two decades, excluding recessions, according to Credit Suisse.
Bank of America upgrades Ralph Lauren:
Bank of America upgraded Ralph Lauren to buy from neutral, saying the apparel brand can pull away from its peers as retailers deal with a promotional backdrop.
“We are upgrading Ralph Lauren (RL) to Buy to reflect our confidence in strong revenue trends continuing given the brand’s global diversification and management’s ability to pull cost levers in this choppy environment (the new norm),” analyst Christopher Nardone wrote in a Monday note.
Earnings calls highlighting ‘resilient’ consumer spending at odds with recession narrative
Give “resilience” a chance, not “recession.”
That’s one of the messages of recent corporate earnings conference calls, where references to “resilient” consumer spending is at least as prominent to references to a looming recession.
Look at these:
MasterCard — “Consumer spending has remained resilient…From an overall consumer spending standpoint, we expect the consumer to be relatively resilient. Spending patterns have largely normalized relative to the effects of the pandemic with the notable exception of China.”
Ralph Lauren — “Our core consumer remains quite resilient.
This is true globally and across all channels.”
Mondelez — “Consumers are still robust and resilience is still well below normal levels.”
Kellogg — “Consumers in our space are surprisingly resilient.
Kimberly-Clark — “Consumer demand in our category remains very strong across the board.” is currently solid. Our brand is very sustainable.”
Goodyear Tire — “[Tire] replacement volume was helped by US consumers and remained solid in the fourth quarter.”
Dow — “Declining inflation, albeit at a low level at the end of 2022, boosts consumer confidence while consumer spending remains resilient.”
Merck — “Consumer is truly a resilient business, very strong through this cyclical environment, January is off to a really good start.”
JPMorgan resumes coverage of Disney with an overweight rating:
JPMorgan resumed coverage of Disney with an overweight rating, and a December 2023 price target of $135 that implies shares could advance more than 20% through year-end.
“While we are cautious on the media landscape overall due to sustained streaming losses and advertising headwinds, Disney is our favorite name among the group due to the company’s strong asset mix and what we expect to be a rapid decline in streaming losses in the next year,” analyst Philip Cusick wrote in a note Monday.
Stocks rise to start the week:
Stocks rose slightly at Monday’s open as traders regained their footing after the S&P 500 and Nasdaq Composite suffered their worst weekly declines in nearly two months.
The S&P 500 climbed 0.17%. The Dow Jones Industrial Average rose 41 points (0.12%) and the Nasdaq Composite Index rose 0.29%.
Credit Suisse says it’s “worst reporting season” in 24 years excluding recession: Contract 2.
2% as a result of weak margins.
The EPS estimate is down 1.7% since the fourth quarter ended December 31st. The company stated that, on average, earnings estimates increase by a factor of 2.
8% per quarter.
Credit Suisse’s US equity strategist Jonathan Golub said it was “the biggest drop in 24 years outside the 2001 recession, financial crisis and the first quarter of the pandemic.” The company said it expects earnings-per-share growth to decline in the first quarter of 2023 as well.
Morgan Stanley downgrades logistics stock XPO:
Morgan Stanley downgraded XPO to equal weight from overweight following what he considered a lackluster quarter for the less-than-truckload (LTL) shipping company. LTL refers to the transportation of smaller freights that often don’t require the use of an entire trailer.
“The 4Q print was tougher than expected and we believe the stock could be in a ‘penalty box’ for a while, as the market seeks more evidence on execution and traction toward LT targets,” analyst Ravi Shanker wrote in a Monday note.
Bowman sees Fed ‘far from’ inflation goal, indicates more rate hikes:
Federal Reserve Governor Michelle Bowman expects interest rates to continue to rise until the central bank makes more progress against inflation.
In a speech Monday morning, Bowman did not provide a specific forecast for rates.
But she indicated that there’s more work to be done, following eight increases since March 2022.
“We are still far from achieving price stability, and I expect that it will be necessary to further tighten monetary policy to bring inflation down toward our goal,” she said in remarks before the American Banking Conference in Orlando, Fla.
“While there are costs and risks to tightening monetary policy to lower inflation, I see the costs and risks of allowing inflation to persist as far greater,” she said.
Bowman also spoke on banking regulation, saying she does not think it’s the Fed’s place to direct institutions on which sectors where they should be allowed to lend. Congressional Democrats have pushed the Fed to discourage lending to fossil fuel companies.
Recent pullback in stocks could be a pause that refreshes growth; Oppenheimer:
Last week’s dismal stock performance could be a pause that ultimately refreshes the market’s upward trajectory, according to John Stoltzfus at Oppenheimer. It may also be a good opportunity for investors to bolster their portfolios with winners poised to gain.
“We remain positive on equities and consider the current retracement as an opportunity for investors to seek out ‘babies that got thrown out with the bathwater’,” Stoltzfus wrote in a Monday note, referring to good-quality stocks that get sold off in market downdrafts.
“In our experience of nearly four decades in the markets, fed fund cycles that take time to work out are never easy to experience but can be rewarding for investors who practice diversification and exercise patience,” he added.
One of the firm’s favorite investment mantras during such periods is “know what you own and why you own it relative to your investment goals, objectives and tolerance to risk and right size your expectations.
According to the memo, this advice is particularly useful at a time when markets are adjusting to new normals.
Morgan Stanley, XPO Logistics Share Downgrade:
Morgan Stanley downgraded XPO stock from Overweight to Equal Weight, citing a disappointing fourth quarter report.
Morgan said in a memo, “Q4 results were weaker than expected, and we believe stocks may be in the “penalty box” for some time as the market seeks more evidence of execution and long-term commitment,” Stanley Monday said. .
Q1 Equity Highs, JPMorgan Report:
Stocks have been rising since October, with the S&P 500 up 14.4% since closing at 3577 in October 12 . But JPMorgan doesn’t think the boom will last.
“Overall, we think we hoped the rally in equities that started last October was fueled by top bond/CPI yields, China’s opening up and falling gas prices in Europe,” equity strategist Mislav Matejka said in a note on Monday. “In our view, Q1 is likely the peak for the market,” he wrote.
Matejka also noted a preference for international stocks over U.S, especially as a technology, will likely continue to struggle in the future.
Originally published at https://businessdor.com on February 13, 2023.
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