This week the economic calendar is thin. Jobless Claim drop will lead the Leading Economic Indicators Higher.
What worries me:
- The Fed, Jerome Powell is the most powerful man on this planet and if he wants the stock market to stay low, he can do it.
- The SP500 is close to the 200 day moving average.
What does not worry me
- Inflation – as velocity of money increases and supply of goods and services increase. Inflation will return to a more normal level, as restrictions ease.
Happy Monday. Good Luck out there this week.
Global Spotlight
Putin and Xi meet amid rising Ukraine tensions. Russian President Vladimir Putin will meet with Chinese President Xi in Beijing during Putin’s trip to attend the Feb. 4 opening ceremony of the Beijing Olympics, where he will update Xi on the current state of talks regarding Russia’s demands for security guarantees from the West.
OPEC+ likely to maintain its production policy. Despite oil prices reaching seven-year highs and growing expectations that oil could hit $100 per barrel, OPEC+ is widely expected to stick to its planned production strategy at its Feb. 2 virtual meeting.
Qatar’s sheikh visits the U.S. president. Qatari Sheikh Tamim bin Hamad al-Thani will meet with U.S. President Joe Biden on Jan. 31 at the White House, where he possibly will deliver a message from Iran.
The European Central Bank Governing Council meets. Eurozone inflation and interest rates will be the public focus when the ECB council meets Feb. 3, but considerable discussion behind the scenes will take place about shielding European banks from fallout from possible economic sanctions on Russia.
World leaders attend the Beijing Olympics. Chinese President Xi Jinping will host banquets for the 30 world leaders attending the Beijing Winter Olympics from Feb. 4-6. A U.S. campaign to hold China accountable for human rights violations in Xinjiang and Hong Kong has put a spotlight on who attends or boycotts the Olympics.
Stratfor.com
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Weeks Numbers
Maximum sustainable employment and financial stab9ility is keeping inflation low, according to Fed Chair Jerome Powell. He turned on the dovish charm as to not spook the markets. The Dow and Nasdaq closed higher than last week, while the SP 500 closed down for the week.
The Beige Book indicated that economic growth expanded although at a moderate pace the last week of 2021. There is still a lot of demand for materials and labor. News about the Omicron has lead to a decrease in leisure travel.
The CPI rose 7% in 2021, the greatest rise in 40 plus years. Personal vehicle sales have lead the way for the increase in inflation. As the holiday shopping subsides, the change in the numbers will come down.
Review Last weeks numbers here.
Earnings
Source I/B/E/S data from Refinitiv
Aggregate Estimates and Revisions
- 21Q4 Y/Y earnings are expected to be 25.2%. Excluding the energy sector, the Y/Y earnings estimate is 17.1%.
- Of the 168 companies in the S&P 500 that have reported earnings to date for 21Q4, 77.4% have reported earnings above analyst estimates. This compares to a long-term average of 65.9% and prior four quarter average of 83.9%.
- 21Q4 Y/Y revenue is expected to be 13.4%. Excluding the energy sector, the growth estimate is 9.4%.
- During the week of Jan. 31, 108 S&P 500 companies are expected to report quarterly earnings.
Macro Market
The market last week failed to take out 4200 and closed only 50 pts shy of the open. The SP 500 seems to want to stay between 4200 and 4500. I do think there are some bullish factors that support the market. Cautiously buy the dips this week.
- Money Velocity and CPI point to the inflation problem being more of a demand problem rather than a systemic problem.
- Seasonality – TAX season is upon us. Money can be allocated to 401K, IRAs that can move the market. With more money in the account, there could be an increase of money flow to these types of accounts.
- The Virus – As restrictions get lifted, and they will, the increase in supply will drive prices down. The people in power will do anything they can to get inflation under control.
- US 10 year yields should start to settle in to a range between 1.7% and 2% as this starts to settle, the market will adjust. Might even force the Fed to not raise interest rates 4 times this year.
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