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S&P 500 and Dow up slightly, Nasdaq down, but off lows
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Energy up most among S&P sectors; cons disc weakest group
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Dollar, crude up; gold ~flat; bitcoin dips
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U.S. 10-Year Treasury yield rises to ~3.74%
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S&P 500 SEEING LOWEST EARNINGS SURPRISE FACTOR SINCE 2008 (1330 EST/1830 GMT) The fourth-quarter earnings season will be winding down in the coming weeks, with results in already from 344 of the S&P 500 companies. Earnings are estimated at this point to have declined 2.8% from the year-ago period, according to IBES data from Refinitiv, and most strategists expect little improvement from here on out. While the majority of companies are beating earnings expectations, in aggregate companies are reporting earnings just 1.6% above expectations.
That compares with an average since 1994 earnings surprise
factor of 4.1% and an average of 5.3% for the prior four
quarters, making the fourth-quarter earnings surprise factor the
lowest since the fourth quarter of 2008.
At the same time, revenue growth for the quarter has
improved and is now is estimated to have increased 5.0%, based
on Refinitiv data.
(Caroline Valetkevitch)
*****
TIME TO TROT OUT THE SUPER BOWL INDICATOR (1220 EST/1720
GMT)
With the NFC's Philadelphia Eagles and the AFC's Kansas City
Chiefs set to clash this Sunday in Super Bowl LVII, Ryan
Detrick, chief market strategist at the Carson Group, is taking
a gander at the Super Bowl Indicator, and what it might mean for
stocks this year.
First off, Detrick advises don't ever invest based on such
things as who wins the Super Bowl.
Nevertheless, for entertainment purposes only, the Super
Bowl Indicator suggests stocks rise for the full year when the
winner of the big dance has come from the original National
Football League (now the NFC), but when an original American
Football League (now the AFC) team has won, stocks fall.
Of course, this is totally random, but it turns out that
when looking at the previous 56 Super Bowls, stocks do better
when an NFC team is victorious with an average gain of 10% vs
about 7% when an AFC team has won.
Detrick notes that this fun indicator was originally
discovered in 1978 by Leonard Kopett, a sportswriter for the New
York Times. Up until that point, the indicator had never been
wrong.
So, is it clear-cut that investors want the Eagles to fly
high and win? Maybe not.
The NFC Rams won last year, and stocks had a horrible year.
Additionally, he says that stocks have gained the full year
in 10 of the past 11 times when a team from the AFC won the
championship.
Detrick notes that Chiefs have won twice and stocks gained
8.5%, about average, while when the Eagles won in 2018, stocks
finished lower for the year.
In any event, Detrick says that the real key might not be
who wins, but by how much they win.
"When it is a single-digit win in the Super Bowl, the S&P
500 is up less than 5% on average and higher less than 60% of
the time. A double-digit win? Things jump to about 11% and 79%.
And wouldn’t you know it, when the final score is three
touchdowns or more, the S&P 500 gained 13.6% for the year and is
higher about 85% of the time."
(Terence Gabriel)
*****
BULLS LEAP TO A MORE THAN ONE-YEAR HIGH -AAII (1145 EST/1645
GMT)
Individual investor optimism over the short-term direction of the U.S. stock market jumped to its highest level in more than a year in the latest American Association of Individual Investors (AAII) Sentiment Survey. With this, pessimism tumbled, while neutral sentiment rose slightly. This, as the Nasdaq is attempting to rise for a sixth-straight week. However, that win streak now looks to be in jeopardy with the IXIC last down more than 2% for the week, heading into the Friday finish.
AAII reported that bullish sentiment, or expectations that stock prices will rise over the next six months, increased 7.6 percentage points to 37.5%. This is the highest level of optimism registered by the survey since Dec. 30, 2021 (37.7%). It is also the first time in 58 weeks that bullish sentiment is at, or above, its historical average of 37.5%.
Bearish sentiment, or expectations that stock prices will fall over the next six months, slid 9.6 percentage points to 25.0%. This is the lowest level of pessimism registered by the survey since Nov. 11, 2021 (24.0%). Bearish sentiment is below its historical average of 31.0% for just the fourth time out of the past 64 weeks. Neutral sentiment, or expectations that stock prices will stay essentially unchanged over the next six months, edged up 2.0 percentage points to 37.5%. Neutral sentiment is above its historical average of 31.5% for the sixth consecutive week. At six weeks, this is the longest streak of above-average neutral sentiment since a seven-week run in December 2021 and January 2022.
With these changes, the bull-bear spread widened to +12.5 percentage points from -4.7 percentage points last week. This is the first positive reading in 45 weeks and the first above-average reading in 58 weeks: AAII noted that "this year's rebound in stock prices along with less aggressive monetary policy are likely contributing to the improved level of optimism." Nevertheless, concerns over the economy, inflation and corporate earnings remain.
(Terence Gabriel)
*****
ACCENTUATING THE LESS-NEGATIVE: CONSUMER SENTIMENT INCHES
HIGHER (1115 EST/1615 GMT)
The mood of the American consumer has brightened a bit more
than expected this month.
The University of Michigan's (UMich) preliminary take on
consumer sentiment edged up 1.5 points to 66.4,
rosier than the 0.1 gain analysts projected.
It was the rosiest preliminary sentiment reading since April
2022, but the index remains 34.2% below the pre-pandemic level
of February 2020.
The "current conditions" element was the star of the show,
jumping 4.2 points, easily offsetting the 0.4 point slide in
near-term expectations.
"Recent developments in the economy, both positive and
negative, have led to mixed attitudes among consumers," writes
Joanne Hsu, director of UMich's Surveys of Consumers. "After
three consecutive months of increases, sentiment is now 6% above
a year ago but still 14% below two years ago, prior to the
current inflationary episode."
The gloomiest aspect of the report was near-term inflation
expectations, which heated up to 4.2% from January's 3.9% print.
That suggests a 1.5 percentage point cool-down from the most
recent core CPI reading.
Five-year inflation expectations held firm at 2.9%.
"The current level of long-term inflation expectations is
probably still uncomfortable for the Fed, but it isn't so high
as to cause them to question their decision to slow down the
pace of rate hikes," says Thomas Simons, economist at Jefferies.
"This won't tell them to speed back up, but it does tell them
that they shouldn't stop."
It's always worth remembering that the sentiment of
consumers, who are responsible for about 70% of U.S. GDP, is not
necessarily an indicator of their behavior.
In fact, as shown in the graphic below, sentiment often
moves in opposition to personal consumption:
By late morning, Wall Street had bounced from its initial
dip, but mostly remained in the red. The Dow was slightly
higher.
Chipmaker NVIDIA Corp weighed heaviest on the S&P
500, and oil supermajors were providing the most upside lift,
with an assist from surging crude prices .
(Stephen Culp)
*****
U.S. STOCKS INCH DOWN EARLY WITH SENTIMENT DATA AHEAD (0955
EST/1455 GMT)
Major U.S. stock indexes are down slightly in early trading
on Friday, with consumer discretionary shares off the
most among S&P 500 sectors, and as investors await a consumer
sentiment report.
Adding to recent gloomy earnings news, Lyft Inc on
Thursday forecast current-quarter profit far below Wall Street
targets. Its shares were down 35% in early trading.
Energy is up more than 2% early and is the biggest
S&P 500 sector gainer.
Here is the early market snapshot:
(Caroline Valetkevitch)
*****
S&P 500 INDEX: BACK ON THE BACK FOOT (0900 EST/1400 GMT)
Since early February, the S&P 500 index appears to be
once again on the back foot. That said, traders are eyeing
important support as they assess whether this weakness is just a
pause in a developing bull-phase or whether more relevant damage
is about to occur.
Indeed, amid anxiety over earnings, the Fed, rising yields,
and next Tuesday's much anticipated January CPI data, the SPX
has now pulled back as much as 3% over the past five trading
days.
And now bitcoin's breakdown is adding to the cautious
tone.
The SPX ended Thursday down around 36 points, or 0.9%, at 4,081.50, and premarket futures action suggests around 15 more points, or 0.4%, of downside in early trade: However, the SPX has support at its January 30 low at 4,015.55. And the 3,968-3,944 area is now packed with a number of important levels.
The rising 50-day moving average (DMA) should be around 3,968 on Friday, the broken resistance line from the SPX's record high, which should now act as support, will come in around 3,955 on Friday, the January 25 low was at 3,949.06, the support line from the October low will be around 3,945 on Friday, and the 200-DMA will resides around 3,944 on Friday. Breaking these levels could severely damage the uptrend off the October trough. Reversing back over the February 7 low at 4,088.39 can see the SPX refocus on resistance in the 4,195.44-4,203.04 area.
(Terence Gabriel)
*****
FOR FRIDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400 GMT
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(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
