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Monday, February 6, 2023
Today’s newsletter is from Brian Sozzia general editor and anchor on Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and in LinkedIn. Read this and more market news on the go with the Yahoo Finance App.
The happy, positive self desperately wants you to like how the market has been performing so far in 2023.
The S&P 500 is up 7.7% this year and the Nasdaq Composite has gained a solid 14.7% in the first five weeks of the year.
But final point, I think you are looking at a classic case of FOMO (fear of missing out) creeping into these markets.
What is everyone afraid of? Missing the precise moment when the Fed says it will stop raising interest rates.
This is a market price at the end of rate hikes for this cycle, and I dare say it prices at rate cuts sometime later in 2023. And this FOMO has been building on itself since mid-2023. January.
But let me be the voice of reason for a brief moment.
Corporate fundamentals just don’t seem to justify this bullish momentum in the markets.
According to FactSet data, 70% of S&P 500 companies reported a positive EPS surprise in the fourth quarter, below the five-year average of 77%. Companies in the S&P 500 are beating fourth-quarter EPS estimates by 0.6% as a whole, below the five-year average of 8.6%.
Fourth quarter earnings are falling about 5.3%. Yes, down!
Last week, we saw a profit loss from Apple, another stinking quarter from Amazon, and a weak quarter from Alphabet thanks to weak advertising on YouTube. Meta’s quarter was also a shoddy one and profits were missed by a lot, but the market loved the deep cuts to the company’s 2023 spending guidance.
Aside from the raw numbers, feedback from corporate executives has hardly been clear. The aforementioned tech companies continue to signal a slowdown in demand as they look for new spending offsets.
Starbucks Chief Financial Officer Rachel Ruggeri told me on Yahoo Finance Live on Friday that they are not seeing the disinflation that Fed Chairman Jerome Powell talked about last week, but that costs continue to rise.
“If you look at market prices so far this year, it’s not even a soft landing. It’s a takeoff. It’s about inflation going down. It’s about price growth to avoid a recession altogether. “It’s also about central banks cutting rates starting in the middle of this year. So markets are really priced perfectly,” Wei Li, BlackRock’s global chief investment strategist, said on Yahoo Finance Live.
“And in the short term, beyond FOMO and momentum seeking, it’s hard to see a fundamental reason for stocks to keep going higher.”
Wei Li is spot on.
The market is getting more dangerous every day. I’m not trying to scare you, but to present the lucid take. Do with it what you want.
Happy trading!
what to see today
Economy
Profits
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Activision Blizzard (ATVI), Chegg (CHGG), Cummins (CMI), ON Semiconductor (ON), Pinterest (PINS), Simon Property Group (SPG), Spirit Airlines (SAVE), Take-Two Interactive Software (TTWO), Tyson Food (TSN)
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