What to Watch for This Week
Last week, the market finally made clear that good news is indeed good news. Q4 GDP surprised to the upside, initial jobless claims remained low, and most importantly December’s Core PCE reading was in line with expectations. The result, each of the three major market indices made numerous 52-Week Highs, including a few all-time highs for the S&P 500 & Dow Jones Industrial Average.
This week, there are a handful of significant market-moving events on deck. This week will feature earnings reports from some of the most important companies in the market like Apple, Inc. & Microsoft Corp. These earnings reports will be joined by a Fed policy decision as the FOMC wraps up its first meeting of the year. Finally, as if this week was not already full of crucial events, additionally, we are expecting a slate of jobs and employment reports as well. The events of this week will likely have an impact on where the market goes in the next few months.
- ADP Employment Report – Before the market opens, on Wednesday morning investors will get the latest ADP employment report for the month of January. The ADP employment report measures the net change month-over-month in private employment in the U.S.
- January’s job gains are forecasted to come in at 140,000, which is less than the previous month’s add of 164,000.
- U.S. Nonfarm Payrolls – As a part of the Bureau of Labor Statistic’s monthly jobs report, the Nonfarm Payrolls report aims to quantify the number of employed workers from the U.S. labor force, excluding a few specific occupations. The key metric generally watched by investors is the month-to-month nominal change in employment.
- U.S. Nonfarm payrolls are expected to report an increase of 180K jobs for the month of January.
- U.S. Unemployment Rate – As a part of the Bureau of Labor Statistic’s monthly jobs report, the Unemployment Rate report aims to measure the percentage of workers in the U.S. labor force who are currently unemployed but are able to work and are seeking employment.
- Expectations are that the U.S. unemployment rate in January was 3.8%. This would be a slight increase over December’s number of 3.7%.
Federal Reserve Watch
Last week we did not hear from Fed members since they were in their official ‘blackout’ period before the upcoming FOMC meeting slated for January 30-31. Wednesday afternoon, investors will hear from Fed Chair Powell about the FOMC’s policy decision. Expectations largely remain that the committee will opt to maintain policy rates at their current range of 5.25-5.5%. Investors will be keyed into what the Fed Chair has to say on Wednesday to see if there are any read-throughs about what the committee may do at upcoming meetings. Last week’s satisfactory PCE inflation readings only helped to build the case for the Fed that they should be able to reduce policy rates soon to avoid becoming too restrictive.
- Looking beyond this week’s meeting, on to the March meeting, investors remain highly uncertain if the FOMC will opt to ease policy at this meeting. The CME’s Fed Watch tool now shows that the market expects a 51.6% probability that the FOMC will opt to maintain current policy levels at the March meeting. This expectation remains the majority opinion by a slim margin, however. There is still a 47.2% probability of a policy rate cut. This is roughly where the market’s expectations were one week ago.
All About the Earnings
This will likely be the most crucial week of Q4 earnings reporting season as we will hear from five of the ‘Magnificent 7’ companies with Microsoft Corp., Alphabet Inc., Apple Inc., Amazon.com, Inc., & Meta Platforms, Inc. set to report their earnings. In addition to those companies, a few key semiconductors players, Advanced Micro Devices, Inc. & QUALCOMM Inc. are set to post their Q4 earnings. Finally, to close out this week’s earnings, both energy giants, Exxon Mobil Corp. & Chevron Corp., are expected to report their fourth quarter earnings.
- This week’s key earnings reports will kick off on Tuesday after the market close when Microsoft Corp. & Alphabet Inc. will report their Q4 earnings. Following those reports, on Thursday once the market closes, we will hear from Apple Inc., Amazon.com, Inc., & Meta Platforms, Inc. as these companies will post their latest fourth quarter earnings.
- MSFT earnings are expected to come in at $2.76 EPS.
- GOOG/GOOGL earnings are expected to come in at $1.60 EPS.
- AAPL earnings are expected to come in at $2.09 EPS.
- AMZN earnings are expected to come in at $0.81 EPS.
- META earnings are expected to come in at $4.81 EPS.
- After both making new 52-Week highs last week, two chip-makers will look to continue their momentum this week as they report their Q4 results. Up first is Advanced Micro Devices, Inc., who is expected to report after the market close on Tuesday. Following this, on Wednesday once the market closes, QUALCOM Inc. will report their latest quarter of earnings.
- AMD earnings are expected to come in at $0.58 EPS.
- QCOM earnings are expected to come in at $1.90 EPS.
- To close out this coming week’s major reports, two U.S. Energy titans will report their Q4 earnings. Prior to the market open on Friday morning, both Exxon Mobil Corp. & Chevron Corp. will make their earnings reports available to the public. Consensus estimates have both companies expected to post much lower Q4 earnings when compared to last year’s Q4 reports.
- XOM earnings are expected to come in at $2.22 EPS.
- CVX earnings are expected to come in at $3.29 EPS.
Thank you for reading this week’s edition of the Weekly Market Periscope Newsletter, I hope you enjoyed it. Please lookout out for the next edition of the newsletter as we will give you a preview of the upcoming week’s important market events.
Author, Weekly Market Periscope
Hughes Optioneering Team