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Kevin Matras   
Profit from the Pros
By Kevin Matras
Executive Vice President
Zacks Investment Research

Markets End Mixed, More Earnings On Deck

Stocks closed mixed yesterday with the Dow up modestly, while the S&P and Nasdaq were down modestly.

Before the open yesterday, Johnson & Johnson reported a positive EPS surprise of 5.86%; Lockheed Martin reported a positive EPS surprise of 5.13%; and General Electric reported a positive EPS surprise of 11.71%. On the negative side, Verizon posted an earnings miss of -0.83%; and Union Pacific posted a negative EPS surprise of -2.91%.

After the close, we heard from Microsoft, which posted a positive EPS surprise of 2.20%. They were up more than 4% in after-hours trade. And Texas Instruments posted a positive EPS surprise of 8.67%. Although, they were essentially flat in after-hours trading.

We've got more big names set to report today with Tesla, Abbott Labs, AT&T, IBM, and Boeing, all on deck, along with another 146 companies set to do the same.

In other news yesterday, the PMI Composite report came in better than expected at 46.6 vs. last month's 44.7. The Manufacturing Index came in at 46.8, a bit above last month's 46.2 and views for 46.5, while the Services Index came in at 46.6 vs. last month's 45.0 and estimates for 45.5.

The Richmond Fed Manufacturing Index declined to -11 vs. last month's print of 1 and the consensus for -3.

Today we'll get MBA Mortgage Applications, the Survey of Business Uncertainty, and the State Street Investor Confidence Index.

After better than expected inflation reports via the CPI and PPI reports over the last two weeks, stocks rallied on the news. The next look at inflation comes on Friday with the Personal Consumption Expenditures (PCE) report, which is the Fed's preferred inflation gauge.

Another better than expected inflation report should solidify expectations for a 25 basis point hike when the Fed makes their next announcement on rates on Feb. 1.

A move of 25 bps would put the midpoint for the Fed Funds rate at 4.63%. That would leave only 2 more hikes of 25 basis points to get to their projected terminal rate of roughly 5.10%.

The market will be listening for any clues as to whether the Fed expects to lower that target, maintain it, or raise it.

In the meantime, there's more trading days to get thru first.

January is off to a great start.

And this week is off to a great start as well.

A few good earnings reports and economic reports is likely all it will take to keep that momentum going.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research


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