Daily Markets: Will the S&P 500 Hit 5000?

Today’s Big Picture

Asia-Pacific equity markets finished the day mixed. Hong Kong’s Hang Seng declined 1.27% in a mixed day that saw Distribution Services names like Alibaba (BABA) drag the index lower, and India’s SENSEX fell 1.00%. Australia’s ASX All Ordinaries gained 0.31%, South Korea’s KOSPI rose 0.41%, China’s Shanghai Composite added 1.28% and Japan’s Nikkei closed 2.06% higher as markets reacted to speculation that the Bank of Japan will not be touching rates any time soon which, in turn weighed on the Yen. Taiwan’s Market remain closed for the country’s New Year’s celebrations.

European markets are mixed in midday trading and U.S. equity futures are pointing to a lower open even as the S&P 500 closes in on a new record at 5,000. That level could be a magnet for stocks, especially with investor sentiment returning to “Extreme Greed” this week. Fueling that move is the combination of improving economic data and better than expected quarterly results so far in the current earnings season. That is building investor confidence for 2024 profit growth and earnings despite the growing likelihood that Fed rate cuts may get pushed back to 2H 2024. Those expectations could be tested next week when the market receives the next batch of GDP inputs and January inflation data.

Data Download

International Economy

China's consumer prices fell by 0.8% YoY in January, marking the fourth straight month of decline which was the longest streak of drop since October 2009. China's producer prices fell by 2.5% YoY in January, after a 2.7% drop in the prior month and compared with market estimates of a 2.6% decline. While marking the softest drop in four months, the latest result was the 16th straight month of contraction in factory gate prices, reflecting persistent deflation forces in the economy.

Domestic Economy

When she appears before the Senate Banking Committee today, Treasury Secretary Janet Yellen, per her prepared remarks, will share an upbeat assessment of the economy as she goes on to highlight the Financial Stability Oversight Council’s 2023 annual report. Fed speakers today include Atlanta Fed President Tom Barkin, who is also expected to speak before the Economic Club of New York.

Consumer credit increased by $1.6 billion in December, a far smaller gain than the expected $16.3 billion and the $23.5 billion added in November. That slower pace fits with banks tightening their lending standards and demand for credit lessening in the face of higher interest rates.

As was widely expected, the Senate bill for Ukraine/Israel funding and border security failed to pass. Senators are expected to vote on bill for Israel and Ukraine funding without border security, and it will require 60 votes to pass.

Per Census Bureau data, Mexico overtook China to be the top source of goods imported by the U.S. in 2023 for the first time in more than two decades, as Washington diversified towards countries closer to home amid growing tensions with Beijing.

Markets

Sector standouts included Technology (1.32%) which was boosted by Microsoft (MSFT) and Nvidia (NVDA) contributing to just over half of yesterday’s results, and Consumer Discretionary (1.12%) which similarly benefitted from a strong day from Amazon (AMZN) and Tesla (TSLA). The remaining sectors saw results ranging from -0.09% (Consumer Staples) to 0.80% (Materials). Broad indexes fell into old habits as all but the Russell 2000 (-0.17%) saw gains. The Dow advanced 0.40%, the S&P 500 rose 0.82% and the Nasdaq Composite closed 0.95% higher.

While mega caps helped sway their respective sectors, Consumer Discretionary got an additional boost from shares of Chipotle (CMG) which were bid 7.21% higher after the company announced a strong quarter and received upward price target estimates from a number of analyst firms. Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: 2.62%
• S&P 500: 4.72%
• Nasdaq Composite: 4.96%
• Russell 2000: -3.78%
• Bitcoin (BTC-USD):5.44 %
• Ether (ETH-USD): 5.58%

Stocks to Watch

Advanced Drainage Systems (WMS), CyberArk (CYBR), Hershey Foods (HSY), Kellanova (K), Masco (MAS), Ralph Lauren (RL), and Solar Winds (SWI) are expected to release quarterly earnings before equities begin trading later this morning.

Pre-market breadth is holding steady today as 233 names in the S&P 500 have traded hands so far this morning with 129 gainers and 104 decliners. Names catching a strong bid this morning include Monolithic Power (MPWR), Disney (DIS) (more below), and Global Life Inc (GL) while PayPal (PYPL) (more below) and Paycom Software (PAYC) are coming under significant pressure.

Arm Holdings (ARM) shares moved considerably higher after the company’s beat and raise December quarter. The company delivered EPS of $0.29 on revenue of $824 million for the quarter, topping the consensus forecasts of $0.25 and $762.5 million. For the current quarter, ARM guided to EPS of $0.28-$0.32 on revenue of $850-$900 million compared to the market’s expectation for $0.20 and $778.8 million. In sharing that outlook, management commented it expects “the demand for compute to continue to grow as the complexity and performance requirements of electronic devices increase. Additionally, we expect that Arm will continue to gain market share, especially in key end-applications such as automotive and cloud servers, where the virtuous cycle of more Arm-based chips going into more products drives more software development, which in turn generates more demand for Arm technology.”

Disney shares are up in premarket trading following its quarterly results that beat estimates and announced it would take a $1.5 billion stake in Epic Games, the market of Fortnite. The two companies are expected to leverage Disney’s intellectual property and character library across Disney, Pixar, Marvel, Star Wars, and Avatar to create new games. Disney also shared it would launch an ESPN streaming service in 2025. The company also shared it continues to expect to reach profitability at combined streaming businesses in the fourth quarter of fiscal 2024. For 2024, Disney issued upside guidance of at least $4.60, compared to the $4.29 consensus.

While PayPal’s December quarter results came in ahead of analyst expectations, the company issued 2024 EPS guidance for flat-ish performance, putting it near $5.10, below the $5.51 consensus. For Q1, it anticipates adjusted EPS growth in the mid-single digits from $1.17 in the year-ago period, suggesting around $1.23, which is lower than the $1.26 consensus. PYPL shares were down in aftermarket trading as investors digested that guidance.

Shares of Digital Turbine (APPS) shares were also under pressure in aftermarket trading following lower-than-expected quarterly results and guidance. For 2024, the company expects revenue between $547-$553 million, more than a little short of the consensus estimate of $572.47 million.

Costco (COST) reported net sales of $22.08 billion for the retail month of January, up 4.5% YoY. December adjusted comp sales that exclude the impacts from changes in gasoline prices and foreign exchange of +3.4% with the U.S. up 2.2%.

Tesla (TSLA) confirmed that it plans to restart production at Gigafactory Berlin next week after shutting it down due to supply issues.

IPOs

Readers who want to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Affirm (AFRM), Cloudflare (NET), Motorola Solutions (MSI), Synaptics (SYNA), Take-Two (TTWO), and Terex (TEX) are expected to report quarterly results after equities stop trading today. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Monday, February 12

• US: Treasury Budget – January

Tuesday, February 13

• Japan: Producer Price Index, Machine Tool Orders - January
• Eurozone: ZEW Economic Sentiment Index - February
• US: NFIB Small Business Optimism Index – January
• US: Consumer Price Index – January

Wednesday, February 14

• UK: Inflation Rate - January
• Eurozone: GDP (2^nd estimate) – 4Q 2023
• Eurozone: Industrial Production - January
• US: Weekly MBA Mortgage Applications
• US: Weekly EIA Crude Oil Inventories

Thursday, February 15

• Japan: GDP – 4Q 2023
• UK: GDP – 4Q 2023
• US: Weekly Initial & Continuing Jobless Claims
• US: Import/Export Prices – January
• US: Retail Sales – January
• US: Industrial Production & Capacity Utilization – January
• US: NAHB Housing Market Index – February
• US: Weekly EIA Natural Gas Inventories

Friday, February 16

• UK: Retail Sales - January
• US: Producer Price Index – January
• US: Housing Starts & Building Permits – January
• US: University of Michigan Consumer Sentiment Index (Preliminary)

Thought for the Day

“In any given moment we have two options: to step forward into growth or step back into safety.” ~ Abraham Maslow

Disclosures

• Cloudflare (NET), CyberArk (CYBR) are constituents of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
• Nvidia (NVDA),PayPal (PYPL) are constituents of the Tematica BITA Digital Infrastructure & Connectivity Index
• Costco (COST) is a constituent of the Tematica BITA Big Spenders & Savers Index
• Microsoft (MSFT) is a constituent of the Tematica Research Thematic Dividend All-Stars Index

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks Economy Earnings Central Banks