/ January 30
-
Thursday:
Q4 GDP Growth Rate QoQ (2.8% exp.)
Initial Jobless Claims (220K exp.)
---
Friday:
Core PCE Price Index MoM (0.2% exp.)
Personal Income MoM (0.4% exp.)Personal Spending MoM (0.4% exp.)
-
Thursday:
Apple AAPL
AppFolio APPF
Deckers Outdoor DECK
Atlassian TEAM
Blackstone BX
Caterpillar CAT
Mastercard MA
Northrop Grumman NOC
United Parcel Service UPS
---
Friday:
AbbVie ABBV
Colgate-Palmolive CL
Exxon Mobil XOM
Phillips 66 PSX
Daily Briefing
*The stock market had a mixed showing in a day where there was little conviction from buyers and sellers alike; in the early going, a wait-and-see attitude prevailed, as participants looked forward to the FOMC policy decision at 2:00 ET, followed by Fed Chair Powell's press conference at 2:30 ET;
*The FOMC voted unanimously to leave the target range for the fed funds rate unchanged at 4.25-4.50%, which was entirely expected by the market;
*The language of the directive changed to exclude the line that "Inflation has made progress toward the Committee's 2 percent objective..." Instead, the January directive said that "Inflation remains somewhat elevated."; this spooked risk assets, which took a turn lower following the statements; markets ultimately settled little changed from the levels recorded before the meeting — an acknowledgement that participants didn't see anything truly surprising in today's decision or in the Fed Chair's comments;
*SPY finished -0.45% lower on the day and remains in consolidation mode, trading below resistance at $610; support at the 50-DMA looks like holding for now, after most of the risk events this week have passed; nevertheless, there’s still a batch of earnings to content with tonight (AAPL among others) and Core PCE metrics tomorrow; as long as the market can hold current levels, there is the potential for further gains to materialize into February;
*The MACD signal has significantly lost some of its momentum and a negative crossover becomes more probable;
*The Nasdaq Composite declined -0.5%, and the Dow Jones Industrial Average also logged a -0.3% loss;
*8 out of 12 S&P Sectors closed with a loss, most notably Real Estate (XLRE, -1.16%);
*While the Fed held rates steady as widely expected, our view is that there is a case for rate cuts: Personal consumption, which represents over two-thirds of economic activity;
*Consumers' spending capacity is naturally tied to their income; to spend, one needs to earn first; as such, the sense of job and wage security influences the consumption patterns of most individuals;
*In light of this, we present a chart that should raise concerns for the Federal Reserve; the chart below, provided by The Daily Shot, indicates a significant decline in the University of Michigan's survey of real household income expectations, to one of the lowest readings on record;
*There is a strong link between income expectations, the labour market and economic activity; when consumers feel secure in their jobs and believe their wages can meet or surpass inflation, they are more inclined to spend; on the other hand, if they are concerned about potential layoffs or stagnant wages, they usually choose to save;
*Although labor market indicators are generally positive, there is some concern brewing under the surface; continuing jobless claims are consistently increasing and have reached their highest level in over three years, for example; this is no longer the “employee’s job market” of 2022 - 2023;
*Consistent with this observation is the JOLTS job quits, also at a record 3 year low; while the number of layoffs itself remains low, employers aren’t hiring either, and employees can feel this (that’s why they are reluctant to quit); accordingly, the broad labor market data may seem good, but the chart below and other data should give the Fed pause that consumers may start to spend less and save more;
*Sentiment declined on the day to an extremely “Neutral” reading overall;
*The bond market registered minimal movement after the Fed decision; the 2-yr note yield, which is most sensitive to changes in the fed funds rate, settled two basis points higher at 4.23% and the 10-yr yield was unchanged at 4.56%;
*TLT declined -0.2% and trades below our stop level ($89) - remaining broadly uninvestible;