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The week of February 6 is going to be a light on the economic data front, but that shouldn’t prevent the market from making significant moves. With the flurry of important information that came out last week we are likely to see the market continue to react to a lot of that data in the coming days.
Highlights for the week ahead include public statements from Fed Chair Powell, anticipated earnings from Disney (DIS - Free Report) , jobless claim numbers, potentially some insights from Charlie Munger – and more.
Last Week Recap
Last week was particularly active for data, earnings, and news. The big news started midway through the week, when the Federal Reserve raised interest rates by 25 bps. Following that, big tech reported shaky earnings, citing macroeconomic conditions as the primary obstacle. Then Friday morning employment numbers came in extremely hot, and to top it off a Chinese spy bubble floated across the country before being shot down.
The Federal Reserve raised the key federal funds rate by 0.25% to 450-475 bps in line with expectations. Chair Powell optimistically acknowledged the start of disinflation but was fairly measured, saying the committee will remain data dependent.
A Chinese surveillance balloon was shot down by US military jets over the Atlantic Ocean. The balloon was first sighted Tuesday over Montana but was not shot down until Saturday.
Non-farm payroll data came in extremely hot showing 517,000 new jobs were created in January, significantly higher than the expected 187,000, bringing the Unemployment rate to 3.4%.
The hot employment print shook investors and reversed much of the gains on the week. While Wall Street left Wednesday’s Fed meeting confident about future policy, the employment data renews fears of high inflation, and shifted fed fund futures expectations, increasing the odds of an additional rate hike in May from 30%-64%.
Image Source: CME
With less action this week, this should be a period where the market can really digest all the new information that just came out.
Monday:
Monday is light in terms of news, but overnight futures trading shows it may be a busy day. Futures indicate that equity indexes will be opening down -1%, and interest rates will be trading higher (bond prices lower).
Notable Earnings: ATVI, SPG, CMI, TSN, PINS, L
Tuesday:
On Tuesday Jerome Powell will be giving a speech at the Economic Club of Washington. Wall street will be listening closely to see if he gives any further insight into what investors can expect for future interest rate policy. Expectations of rate cuts in 2023 are quickly falling, while fears of another spike in inflation are gaining traction. If Powell provides more clarity on these topics it could make for significant moves in the equity and bond markets.
Additionally, Tuesday night President Biden will be addressing the country in his State of the Union speech. There have been whispers of him going after big tech in the speech, so headline risk is a possibility.
There will also be data released for the US Trade Deficit and consumer credit.
Notable Earnings: BP, KKR, CMG, TDG, ILMN, ENPH
Wednesday:
Wednesday there will be a number of public statements from members of the Federal Reserve including John Williams, Lisa Cook, Michael Barr, Raphael Bostic, Neel Kashkari, and Christopher Waller. The market will be looking for any clues on future interest rate policy, comments on the economy, employment and inflation expectations.
Also Wednesday, Disney will be reporting its highly anticipated quarterly earnings. The report draws attention because of the very public drama Disney has attracted in recent months. After a couple very challenging years for the stock, CEO Bob Chapek was publicly criticized and dismissed by former CEO Bob Iger, who was reappointed.
This action at Disney has drawn out activist investors, and Trian Partners' Nelson Peltz has launched a campaign for a seat on Disney’s board. Peltz, known for working with boards, rather than against them has a strong history of successful activist campaigns at some of the largest companies, including Procter and Gamble, Heinz and Dupont.
Peltz has released his concerns for Disney, but the board continues to reject his efforts to join. Peltz believes there are three core areas where the board needs to fix Disney’s business. First, is capital expenditures. Overspending on new media assets has halved EPS since 2018, and eliminated Disney’s dividend payment. Second, he is directly critical of management’s succession planning, and “over-the-top” compensation. And lastly, Peltz is extremely critical of the streaming business. Considering the scale, history, and recognition of Disney’s media assets it surprising how terrible unit economics have been. Disney plus is projected to bring in $34 billion in revenue for FY25 and just $900 million in profit, while Netflix was able to generate $5.7 billion profit on $31.5 billion in revenue.
Image Source: Zacks Investment Research
Disney missed earnings by -40% last quarter and current quarter estimate have been lowered multiple times over the last 90 days from $1.06 to $0.69 per share. Zacks Expected Surprise Prediction is expecting a -3.4% miss. Disney will report after the market close.
Image Source: Zacks Investment Research
Notable Earnings: CVS, DIS, D, TEVA, CME, ORLY, MGM, UA
Thursday:
With inflation, growth and interest rates top of mind Thursday morning’s Initial Jobless Claims report should be highly scrutinized. After last week's extremely hot NFP report doused investors’ hopes for an early Fed pivot, we can expect bulls to look for numbers in line with expectations, while bears will be encouraged by another strong number. The stronger the employment situation, the stronger the economy, and if the economy remains strong, Fed officials are less likely to reduce interest rates in 2023.
For fans of legendary curmudgeon Charlie Munger, Friday should be fun. Daily Journal Corporation (DJCO - Free Report) , a small American legal publication and technology company led by Warren Buffett’s right hand man Munger is reporting earnings on Friday. Munger known for his quick wit, and deep investing wisdom uses DJCO’s earnings periods for public comments, and investors are always keen to hear what Charlie has to say.
Of particular interest will be what Munger has done with his shares in Alibaba BABA, which he bought in the DJCO treasury. The move has been criticized by investors because of the risks involved investing in Chinese securities.
Also Friday morning there will be data released for Consumer Sentiment and Federal Budget balance.
Notable Earnings: BTI, HMC, DJCO
Wrap Things Up
With Fed policy top of mind, and earnings pouring in this week should be a full of busy price action, and rapidly shifting investor sentiment.
After breaking out of a multi-month downtrend last week on dovish Fed speak, bullishness around the stock market was palpable. But that sentiment was quickly reined in by the surprising NFP numbers. It will be extremely interesting to see how the narrative shifts this week in regard to future interest rate hikes, the economy and inflation. Whether the market re-test the breakout level, reverses creating a failed breakout, or just continues rallying we will find out this week.
Image Source: Zacks Investment Research
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Week Ahead: Disney, Powell & Market Breakouts
The week of February 6 is going to be a light on the economic data front, but that shouldn’t prevent the market from making significant moves. With the flurry of important information that came out last week we are likely to see the market continue to react to a lot of that data in the coming days.
Highlights for the week ahead include public statements from Fed Chair Powell, anticipated earnings from Disney (DIS - Free Report) , jobless claim numbers, potentially some insights from Charlie Munger – and more.
Last Week Recap
Last week was particularly active for data, earnings, and news. The big news started midway through the week, when the Federal Reserve raised interest rates by 25 bps. Following that, big tech reported shaky earnings, citing macroeconomic conditions as the primary obstacle. Then Friday morning employment numbers came in extremely hot, and to top it off a Chinese spy bubble floated across the country before being shot down.
Image Source: CME
With less action this week, this should be a period where the market can really digest all the new information that just came out.
Monday:
Monday is light in terms of news, but overnight futures trading shows it may be a busy day. Futures indicate that equity indexes will be opening down -1%, and interest rates will be trading higher (bond prices lower).
Notable Earnings: ATVI, SPG, CMI, TSN, PINS, L
Tuesday:
On Tuesday Jerome Powell will be giving a speech at the Economic Club of Washington. Wall street will be listening closely to see if he gives any further insight into what investors can expect for future interest rate policy. Expectations of rate cuts in 2023 are quickly falling, while fears of another spike in inflation are gaining traction. If Powell provides more clarity on these topics it could make for significant moves in the equity and bond markets.
Additionally, Tuesday night President Biden will be addressing the country in his State of the Union speech. There have been whispers of him going after big tech in the speech, so headline risk is a possibility.
There will also be data released for the US Trade Deficit and consumer credit.
Notable Earnings: BP, KKR, CMG, TDG, ILMN, ENPH
Wednesday:
Wednesday there will be a number of public statements from members of the Federal Reserve including John Williams, Lisa Cook, Michael Barr, Raphael Bostic, Neel Kashkari, and Christopher Waller. The market will be looking for any clues on future interest rate policy, comments on the economy, employment and inflation expectations.
Also Wednesday, Disney will be reporting its highly anticipated quarterly earnings. The report draws attention because of the very public drama Disney has attracted in recent months. After a couple very challenging years for the stock, CEO Bob Chapek was publicly criticized and dismissed by former CEO Bob Iger, who was reappointed.
This action at Disney has drawn out activist investors, and Trian Partners' Nelson Peltz has launched a campaign for a seat on Disney’s board. Peltz, known for working with boards, rather than against them has a strong history of successful activist campaigns at some of the largest companies, including Procter and Gamble, Heinz and Dupont.
Peltz has released his concerns for Disney, but the board continues to reject his efforts to join. Peltz believes there are three core areas where the board needs to fix Disney’s business. First, is capital expenditures. Overspending on new media assets has halved EPS since 2018, and eliminated Disney’s dividend payment. Second, he is directly critical of management’s succession planning, and “over-the-top” compensation. And lastly, Peltz is extremely critical of the streaming business. Considering the scale, history, and recognition of Disney’s media assets it surprising how terrible unit economics have been. Disney plus is projected to bring in $34 billion in revenue for FY25 and just $900 million in profit, while Netflix was able to generate $5.7 billion profit on $31.5 billion in revenue.
Image Source: Zacks Investment Research
Disney missed earnings by -40% last quarter and current quarter estimate have been lowered multiple times over the last 90 days from $1.06 to $0.69 per share. Zacks Expected Surprise Prediction is expecting a -3.4% miss. Disney will report after the market close.
Image Source: Zacks Investment Research
Notable Earnings: CVS, DIS, D, TEVA, CME, ORLY, MGM, UA
Thursday:
With inflation, growth and interest rates top of mind Thursday morning’s Initial Jobless Claims report should be highly scrutinized. After last week's extremely hot NFP report doused investors’ hopes for an early Fed pivot, we can expect bulls to look for numbers in line with expectations, while bears will be encouraged by another strong number. The stronger the employment situation, the stronger the economy, and if the economy remains strong, Fed officials are less likely to reduce interest rates in 2023.
Notable Earnings: ABBV, PEP, AZN, PM, SPGI, PYPL, DUK, HLT, CNSWF, NET, EXPE
Friday:
For fans of legendary curmudgeon Charlie Munger, Friday should be fun. Daily Journal Corporation (DJCO - Free Report) , a small American legal publication and technology company led by Warren Buffett’s right hand man Munger is reporting earnings on Friday. Munger known for his quick wit, and deep investing wisdom uses DJCO’s earnings periods for public comments, and investors are always keen to hear what Charlie has to say.
Of particular interest will be what Munger has done with his shares in Alibaba BABA, which he bought in the DJCO treasury. The move has been criticized by investors because of the risks involved investing in Chinese securities.
Also Friday morning there will be data released for Consumer Sentiment and Federal Budget balance.
Notable Earnings: BTI, HMC, DJCO
Wrap Things Up
With Fed policy top of mind, and earnings pouring in this week should be a full of busy price action, and rapidly shifting investor sentiment.
After breaking out of a multi-month downtrend last week on dovish Fed speak, bullishness around the stock market was palpable. But that sentiment was quickly reined in by the surprising NFP numbers. It will be extremely interesting to see how the narrative shifts this week in regard to future interest rate hikes, the economy and inflation. Whether the market re-test the breakout level, reverses creating a failed breakout, or just continues rallying we will find out this week.
Image Source: Zacks Investment Research