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Get ready for a deluge of data next week that will shape the Fed’s next moves

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2 months ago

January 22, 2023

Buckle up, next week is a big one: We’ll see lots of quarterly reports as this earnings season ramps into high gear, and also get several key macroeconomic reports that are sure to influence investors’ thinking on the future path of the Federal Reserve. The two economic reports to pay most attention to are the “advance estimate” on fourth-quarter GDP on Thursday, and the personal spending report, specifically the annual change in the core PCE price index — the Fed’s preferred measure of inflation — on Friday. We would like to see numbers that are in line with economists’ expectations, or even a bit weaker. This would indicate the Fed’s rate hikes are working. But we don’t want to see numbers that come in two far below expectations. This could mean the Fed went too far, too fast and spark fears that the economy is headed for a hard landing and deep recession. The central bank is trying to thread the needle. Within the portfolio, we’ll get the latest earnings from Danaher (DHR), Halliburton (HAL), and Johnson & Johnson (JNJ) on Tuesday before the opening bell. Microsoft (MSFT) reports on Tuesday after the bell. While the results will be important as always, we are most interested in the earnings call with analysts and investors. Comments from management teams will likely determine the next direction in these names as analysts sharpen their pencils in an attempt to better determine a reasonable full year 2023 earnings number (both for individual stocks and the S & P 500 overall). As a reminder, Danaher already positively preannounced the quarter. On the call, we will listen closely for updates on bioprocessing inventory reductions as the drawdown here could become a near-term headwind. It wouldn’t, however, impact our longer-term view on the life sciences company. Strong earnings from Schlumberger (SLB) on Friday bode well for Halliburton. For oil companies, it’s all about current demand, which we suspect will be quite strong given years of underinvestment. Johnson & Johnson is a stock we continue to like ahead of earnings as noted during the January Monthly Meeting (and in our rapid-fire update ). The stock hasn’t done much over the past year, which isn’t bad compared to the S & P 500, but we believe the coming break up into two public companies is an identifiable and material positive catalyst that is in the best interest of shareholders. With Microsoft, we’re looking at profit margins and capital expenditures as expenses in the tech sector are a major issue on investors’ minds. We also want to see Azure revenue growth as this remains one of the most important line items of the report. As a reminder, Microsoft doesn’t provide forward guidance until the end of management’s prepared remarks on the conference call, so take any initial move on the release with a mound of salt. Here are some other earnings reports and economic numbers to watch in the week ahead: Monday, January 23 Before the bell: : Baker Hughes (BKR), Synchrony Financial (SYN) After the bell: Brown & Brown (BRO), Crane (CR), Logitech (LOGI), Zions Bancorp (ZION) Tuesday, January 24 Before the bell: General Electric (GE), 3M (MMM), DR Horton (DHI), Lockheed Martin (LMT), Travelers (TRV), Union Pacific (UNP), Verizon (VZ) After the bell: Canadian National Rail (CNI), Capital One (COF), Intuitive Surgical (ISRG), Texas Instruments (TXN) 9:45 a.m. ET: Flash PMI Wednesday, January 25 Before the bell: Abbott Labs (ABT), ASML (ASML), AT & T (T). ADP (ADP), Boeing (BA), Elevance Health (ELV), Freeport-McMoRan (FCX), General Dynamics (GD), Group 1 Auto (GPI), Hess (HES), Kimberly-Clark (KMB), NextEra Energy (NEE), Norfolk Southern (NSC), Teledyne (TDY), Textron (TXT), Progressive (PGR) After the bell: Ameriprise (AMP), Crown Castle (CCI), CSX (CSX), Flex (FLEX), IBM (IBM), Lam Research (LRCX), Las Vegas Sands (LVS), Levi Strauss (LEVI), Packaging Corp (PKG), Seagate (STX), ServiceNow (NOW), Tesla (TSLA), United Rentals (URI), Whirlpool (WHR) Thursday, January 26 Before the bell: Volvo (VLVLY), Alaska Air (ALK), American Air (AAL), Archer-Daniels (ADM), Blackstone (BX), Comcast (CMCSA), Dow Chem (DOW), JetBlue Air (JBLU), Marsh & McLennan (MMC), Mastercard (MA), McCormick (MKC), Mobileye (MBLY), Nokia (NOK), Northrop Grumman (NOC), Nucor (NUE), Rockwell Automation (ROK), SAP (SAP), Sherwin-Williams (SHW), Southwest Air (LUV), STMicroelectronics (STM), Valero (VLO), Tractor Supply (TSCO) After the bell: Eastman Chemical (EMN), Intel (INTC), KLA Corp (KLAC), L3Harris (LHX), Olin Corp (OLN), Visa (V) 8:30 a.m. ET: Initial Claims 8:30 a.m. ET: Durable Good Orders 8:30 a.m. ET: Gross Domestic Product (4Q22 advance estimate) Friday, January 27 Before the bell: American Express (AXP), Booz Allen (BAH), Chevron (CVX), Charter Comm (CHTR), Colgate-Palmolive (CL) 8:30 a.m. ET: Personal Spending & Income 10:00 a.m. ET: Pending Home Sales Looking back Markets closed mixed for this holiday-shortened trading week, as earnings season got underway and we received additional signs that economic growth is undeniably slowing. The Nasdaq posted a slight gain of 0.55%, while the Dow fell 2.7% and the S & P 500 dropped about 0.66%. But in this market, bad news is good news. Hopefully we’re near the final innings of the Fed’s rate hiking cycle. On Wednesday, the producer price index showed a decline of 0.5% in December, much more than expectations for a 0.1% monthly decline and the largest monthly decline since April 2020. Excluding food and energy, core PPI rose 0.1%, in line with expectations. Also Wednesday, December retail sales were indicated a 1.1% decrease, slightly more than the 1% expected. December industrial production, also released on Wednesday, showed a decline 0.7%, more than the 0.1% decline expected. Meanwhile, capacity utilization hit 78.8%, below the 79.5% expected. Notably, the November industrial production reading was revised materially lower to indicate a 0.6% monthly decline, down from the 0.2% decline previously reported. On Thursday, initial jobless claims for the week ending Jan. 14 came in at 190,000, a decrease of 15,000 from the prior week and below the 214,000 expected. Housing Starts fell 1.4% in December to a seasonally adjusted annual rate of 1.38 million, slightly above the 1.36 million expected. Building permits dropped 1.6% in December to a seasonally adjusted annual rate of 1.33 million, below expectations of 1.37 million. And on Friday, existing home sales reported a 1.5% decline in December to a seasonally adjusted annualized rate of 4.02 million units, the slowest pace since November 2010. Under the hood, communication services led to the upside, followed by energy and technology. Industrials led to the downside, followed by utilities and consumer staples. Meanwhile, the U.S. dollar index remains at the 102 level. Gold is holding in the low-$1,900s per ounce. WTI crude prices is hovering at around $80 per barrel, while the yield on the 10-year Treasury stands at around 3.5%. Within the portfolio the portfolio we received earnings results from Morgan Stanley (MS) and Procter & Gamble (PG). (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Screens on the trading floor at New York Stock Exchange (NYSE) display the Federal Reserve Chair Jerome Powell during a news conference after the Federal Reserve announced interest rates will raise half a percentage point, in New York City, December 14, 2022.

Andrew Kelly | Reuters

Source: CNBC

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