January 27, 2023

It was a roller coaster ride to close the week but the major averages managed to hold onto their gains today despite a late rush for the exits. Economic data was better than expected with the Fed's preferred inflation gauge, the Personal Consumption Expenditure(PCE) price index up +0.2% as expected and +5% YoY vs. +5.5% the prior month and Core-PCE at +4.4% YoY, down from +4.7% in November. Pending Home Sales rose +2.5% beating estimates, while the Consumer Confidence Index increased to 64.9. The different indexes jumped at the open but dropped back to the flat line on mixed earnings before taking another leg up in the afternoon. On the earnings front, American Express (AXP) and Visa (V) delivered beats, but semiconductors struggled on disappointing numbers from Intel (INTC) and KLA Corp (KLAC), both down more than -6%. The sectors were mixed after the late selloff with Consumer Discretionary (XLY), REITs (XLRE), Communication Services (XLC) Technology (XLK) and Industrials (XLI) finishing positive, while Energy (XLE), Healthcare (XLV), Materials (XLB) and Consumer Staples (XLP) were red. The Energy sector was hit by a -4.44% drop in shares of Chevron (CVX) after beating on earnings but missing on revenue, and a drop in crude oil prices back below $80 a barrel. The DJIA held onto a 28.67 point (+0.08%) gain and settled at 33978.08, while the S&P 500 added 10.13 points (+0.25%) closing at 4070.56. An +11% spike in Tesla (TSLA) helped the NASDAQ pick up 109.30 points (+0.95%) finishing at 11621.71.

Breadth was positive with advancing issues beating declining issues 1.4:1 on the NYSE and 1.3:1 on the NASDAQ. Advancing volume was 59% on the NYSE and 65% of the NASDAQ. The VIX eased 0.22 (-1.17%) and closed at 18.51. Crude oil prices lost 1.59 (-1.96%) and the March contract closed at $79.42 a barrel. Gold prices slipped 1.40 (-0.07%) and finished at $1928.60 an ounce. Bitcoin (BTC) closed the session at $23,100.

It was a good week for the bulls, but investors will be cautious ahead of next week's FOMC meeting. A 0.25-point hike looks to be in the cards but don't expect Fed Chair Powell to sound too dovish on what the committee will do going forward. A feel good market rally could hinder progress made on inflation. Look for equities to struggle to start the week with traders keeping an eye on resistance at 4100 for the S&P 500. That represents the top for November and December. However, a close above that level could trigger a short covering rally.

Earnings releases to watch for on Monday include: Southern Copper Corp (SCCO), NXP Semiconductor (NXPI), Whirlpool Corp (WHR) and AGNC Investments (AGNC).

Monday's Market Moving Economic Calendar: Dallas Fed Manufacturing Survey

David Blake, CMT