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Weekly Economic Update: January 24, 2023

Presented by Nicholas Wealth Management

THIS WEEK ON WALL STREET

Stocks started the week off strong on Monday, closing above the 200 day moving average. However, with a plethera of companies reporting earnings this week from the fourth quarter of 2022, things can change quickly. We will be watching the earnings reports closely for future market direction and whether the current rally can continue to have legs.

LAST WEEK ON WALL STREET

Stocks showed mixed results last week as recession fears resurfaced in response to weak economic data and a tepid start to a new corporate earnings season. The Dow Jones Industrial Average skidded 2.70%, while the Standard & Poor’s 500 declined 0.66%. But the Nasdaq Composite index gained 0.55% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 0.50%.1,2,3

MIXED ECONOMIC DATA
Stocks weakened to start the week amid discouraging corporate earnings and troubling economic data. Disappointing retail sales and manufacturing reports sparked concerns that the Fed may have gone too far in hiking rates, while a drop in initial jobless claims diminished chances of a near-term pause in rate hikes. Welcome news from two big technology names on Friday powered a strong rally that mixed significant indices.

The start of the earnings season was a drag on investor sentiment. While 69% of the S&P 500 constituent companies that reported earnings by Thursday (48 companies) exceeded expectations, the percentage of “beats” is below the three-year average. More concerning, however, was that average earnings declined by more than 2%.⁴

CONSUMERS RETRENCH
Retail sales fell 1.1% in December, capping an overall weak holiday shopping season. November retail sales were revised downward to -1.0%, from the earlier estimate of -0.6%. Compared to November-December 2021, sales increased by 5.3%, below the 6 to 8% increase expected by The National Retail Federation.^5,6

Many economists viewed these lackluster numbers as evidence of a weakening consumer. A more cautious consumer raises more concerns about a recession at some point this year since the primary driver of U.S. economic growth is consumer spending.

THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: Purchasing Managers’ Index Composite.

Thursday: Gross Domestic Product (GDP). Durable Goods Orders. New Home Sales. Jobless Claims.

Friday: Consumer Sentiment.

Source: Econoday, January 20, 2023

The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS
Tuesday: Microsoft Corporation (MSFT), General Electric Company (GE), Verizon Communications, Inc. (VZ), Johnson & Johnson (JNJ), Lockheed Martin Corporation (LMT), Texas Instruments, Inc. (TXN), Union Pacific Corporation (UNP), D.R. Horton, Inc. (DHI), Raytheon Technologies Corporation (RTX).

Wednesday: AT&T, Inc. (T), The Boeing Company (BA), Tesla, Inc. (TSLA), International Business Machines Corporation (IBM), Lam Research Corporation (LRCX), Abbott Laboratories (ABT), CSX Corporation (CSX), NextEra Energy, Inc. (NEE), KimberlyClark Corporation (KMB), Norfolk Southern Corporation (NSC), General Dynamics (GD).

Thursday: Intel Corporation (INTL), Visa, Inc. (V), Mastercard, Inc. (MA), Blackstone, Inc. (BX), Northrop Grumman Corporation (NOC), Southwest Airlines Co. (LUV), Rockwell Automation, Inc. (ROK).

Friday: Chevron Corporation(CVX), HCA Healthcare, Inc. (HCA), American Express Company (AXP), ColgatePalmolive Company (CL)).

Source: Zacks, January 20, 2023

Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

TIP OF THE WEEK:
Sell old stuff to fund a new experience. Sell what you don’t need online or at a yard sale and use the proceeds to partly or fully fund a vacation, an education, or an adventure.