Last week marked a continuation of the market’s current bullish run as both the S&P 500 & Nasdaq indices finished the week at new all-time highs. Last week the rally showed strong signs that it is broadening out as a variety of sectors were rising, coupled with new highs on the NYSE – Advance/Decline index as well as 73% of S&P 500 stocks now trading above their 200-day moving average. This past week’s bullish thrust was propelled by January’s PCE report not posting a surprise but rather coming in in-line with expectations. Additionally, last week’s significant earnings from CRM & DELL came in strong which rewarded the markets with a boost.

Expected this week on Friday are a handful of U.S. employment reports that will shed light on if the U.S. job market is continuing to remain resilient despite the tight financial conditions that have been imposed by the Fed. Should these labor reports remain strong, this will further encourage the Fed to be slow to cut rates until they are comfortable that inflation has remained comfortably below their target. On Thursday afternoon, the latest consumer credit report will be released indicating where the U.S. consumer’s level of borrowing currently stands. Additionally, despite Q4 earnings season largely being finished, there are handful of consequential earnings reports due this week. There are two significant tech companies, including Broadcom Inc., set to report that investors will be watching closely. The other important earnings on deck this week are from a group of various retailers such as Costco Wholesale Corp.

  • 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 188K jobs for the month of February. In January, the U.S. added 353K jobs well-above the expectation of 187K.
  • 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 February was 3.7%. This would be on par with January’s number of 3.7%.
  • U.S. Consumer Credit – Each month the Federal Reserve releases a report that tracks the total amount of credit that is extended to U.S. consumers. This report tracks both revolving and non-revolving credit being used. This report is closely watched to decipher the level at which the consumer is relying on credit in order to keep spending.
    • The consensus is that total U.S. consumer credit will have increased by $10 billion in January. This would follow December’s increase of $1.5 billion which was far lower than the expectation of $16 billion.
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Federal Reserve Watch

There were a variety of speaking events last week at which Fed members continued to communicate where the FOMC committee currently stands. The committee member’s messaging has been consistent. They intend to lower the Fed Funds rate at some point this year, but likely later in the year. However, they are in no rush to do so as economic data continues to come in strong and inflation is still slowing trending down but not yet below their target of 2.0%.

  • With recent Fed messaging coupled with continued strong economic data & positive inflation data, this has served as a catalyst to move Fed Futures markets. The CME Group’s FedWatch Tool now projects a 95.0% probability that the Fed will maintain current policy rates at the meeting this month. This probability is largely unchanged from the previous week.
  • Looking ahead to the next few FOMC meetings, Fed Futures are now indicating that the first policy rate reduction will not come until the June meeting. The CME’s FedWatch tool projects a 75.0% probability that the FOMC will reduce rates at June’s meeting. This is a noticeable increase compared to the previous week, indicating growing confidence in a June cut.

This Week’s Notable Earnings

Now, as the majority of Q4 earnings reports are behind us, it was quite a strong earnings season given thatroughly 73% of S&P 500 companies beat earnings expectations. Despite much of Q4 earnings being in the rear-view mirror, there are a handful of significant earnings reports due this week. Two major tech companies, Broadcom Inc. & CrowdStrike Holdings, Inc. will post their most recent earnings. Additionally, a diverse basket of large retail companies will report their Q4 numbers this week when we hear from Costco Wholesale Corp., Target Corp., & Ross Stores, Inc.

  • On Tuesday after the closing bell, one of the top cybersecurity companies, CrowdStrike Holdings, Inc. will post their Q4 earnings. If CRWD meets earnings expectations, then they will have posted full-year earnings growth of 91.6%. Following this report, on Thursday after the market closes, semiconductor-maker Broadcom Inc. will report their fourth quarter earnings. AVGO is expected to post quarterly earnings that are marginally lower compared to the same quarter last year.
    • CRWD earnings are expected to come in at $0.82 EPS.
    • AVGO earnings are expected to come in at $10.29 EPS.
  • A group of well-known household retailers are expected to report their Q4 earnings this week. Up first is Target Corp., which will report their earnings on Tuesday morning prior to the market open. Later that day, after the closing bell, Ross Stores, Inc. will post their fourth quarter report. Finally, on Thursday after the market closes, the largest retailer of the group, Costco Wholesale Corp., will report their Q4 earnings.
    • TGT earnings are expected to come in at $2.41 EPS.
    • ROST earnings are expected to come in at $1.65 EPS.
    • COST earnings are expected to come in at $3.62 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.


Blane Markham

Author, Weekly Market Periscope

Hughes Optioneering Team