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Profit from the Pros By Kevin Matras Executive Vice President
Stocks Down Again, But Strong Earnings After The Close Could Lift Stocks
Stocks were down again yesterday after giving up earlier gains for the second day in a row.
Absent a rally today, stocks are on pace to close lower for the week. That would make it 4 weeks in a row for the Dow, S&P and Nasdaq.
But strong earnings from Apple after the close yesterday should give a boost to the markets today. They reported an 11.1% positive EPS surprise and a 4.42% positive sales surprise. Apple was up more than 4% in after-hours trade.
Position squaring after Wednesday's FOMC Announcement and Fed Chair Press Conference continued.
Aside from Mr. Powell's slightly more hawkish language (we need to move to a "substantially less accommodative policy"), and his admission that inflation had risen faster than they had thought, the Fed's announcement came in as expected. They reduced their bond buying yet again, with expectations to end their purchases in March. They left interest rates unchanged. They hinted that rates could rise as early as March. And that balance sheet runoff would likely begin once they hike rates, but acknowledged that could take some time.
All in all, they delivered what they had been telegraphing for months.
Stocks were already in pullback/correction mode weeks before the FOMC Announcement. But the confirmation of tighter monetary policy served to help things along.
Nonetheless, the pullback should be short-lived. For one, pullbacks and corrections are common. And two, the economy is poised for another year of solid growth, which suggests another year of solid market gains.
In fact, Q4 GDP was released yesterday and it came in well above expectations at 6.9% vs. expectations for 5.7%.
And with 2022 projected at 4.0%, it looks like we've got lots of growth ahead.
In other news, Weekly Jobless Claims fell by -30,000 to 260K vs. views for 265K. (The 4-week moving average came in at 247K.)
Durable Goods Orders slipped by -0.9% m/m vs. the consensus for -0.5%. But the prior month's tally was upwardly revised from 2.5% to 3.2%. Ex-Transportation, it came in at 0.4% as expected, with the prior month revised higher from a 0.8% gain to a 1.1% gain. And Core Capital Goods came in flat vs. views for 0.4%. But their prior month was revised higher as well from -0.1% to 0.3%.
Today we'll get the Personal Income and Outlays report, the Employment Cost Index, and Consumer Sentiment.
And, of course, earnings season continues with another 34 companies set to report today. (Next week sees another 664 on deck. And then another 905 the week after that.)
As I said yesterday, you can expect more volatility. But it looks like there's a lot more upside to go.
So I'd be looking for opportunities to buy.
Executive Vice President, Zacks Investment Research
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