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Pre-market futures are solidly in the green this morning, though off earlier morning highs: the Dow is +175 points roughly a half hour before the opening bell, with the S&P 500 +20 and the Nasdaq +115 points. Indices are nicely up from the mid-day lows on Thursday, with the S&P 500 back up near all-time highs. We’ve actually been on a relative plateau at current high levels since mid-December, when the big ramp-up on lowering bond yields took hold of the market. But as we’ll see below, there may be reason to temper such preliminary celebration.
Dow component and Zacks Rank #2 (Buy)-rated Travelers Insurance (TRV - Free Report) easily surpassed estimates on its Q4 bottom line this morning, posting $7.01 per share versus $5.04 in the Zacks consensus and #3.40 per share in the year-ago quarter. Revenues of $10.94 billion in the quarter eked out a +0.24% beat over expectations. Shares are up robustly, +5% this morning, adding to its +4% gains year to date. For more on TRV’s earnings, click here.
Chicago Fed President and frequent guest on CNBC’s “Squawk Box” Austan Goolsbee said this morning “a lot of progress has been made on the ‘golden path’ (toward a soft-landing in the economy) in 2023,” but that inflation reads are key for the Fed’s interest rate path. “If we continue to make surprising progress faster than was forecast on inflation, then we have to take that into account…” In other words, a rate cut is on the table, but the economy would need to continue outperforming expectations on the inflationary ramp-down.
Goolsbee appreciates that “Goods prices have returned to mild deflation levels we saw pre-Covid,” along with “surprising levels of Services inflation” having come down, but that the Fed needs to see more improvement on housing prices coming down prior to the Fed taking interest rates down from the 5.25-5.50% range. We’ve kept these levels since the late-July Federal Open Market Committee (FOMC) meeting last year. Many chips currently remain on a pending March rate cut, with 3-4 cuts overall this year (down from 6-7 previously anticipated).
After today’s open, we’ll get a preliminary read on Consumer Sentiment for January, where expectations are for 69.7 — steady with the prior month’s print, and nicely above the cycle low of 59.0 back in May of last year. Elsewhere, Existing Home Sales for December are expected to tick up to 3.83 million, and further off cycle lows from October. However, it is widely expected to mark the fourth-straight sub-4 million monthly tally of existing home sales.
Also, Fed Vice Chair Michael Barr will make an appearance, as will San Francisco Fed President Mary Daly. These will be the final official words from the Federal Reserve prior to the “blackout period” ahead of the next FOMC meeting beginning January 30th. Currently, even the most dovish prognosticators do not foresee an interest rate cut at that meeting. But even the following one in March now only sees a 50/50 chance of a rate cut, according to the latest survey.
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Market Awaits Consumer Sentiment Data
Pre-market futures are solidly in the green this morning, though off earlier morning highs: the Dow is +175 points roughly a half hour before the opening bell, with the S&P 500 +20 and the Nasdaq +115 points. Indices are nicely up from the mid-day lows on Thursday, with the S&P 500 back up near all-time highs. We’ve actually been on a relative plateau at current high levels since mid-December, when the big ramp-up on lowering bond yields took hold of the market. But as we’ll see below, there may be reason to temper such preliminary celebration.
Dow component and Zacks Rank #2 (Buy)-rated Travelers Insurance (TRV - Free Report) easily surpassed estimates on its Q4 bottom line this morning, posting $7.01 per share versus $5.04 in the Zacks consensus and #3.40 per share in the year-ago quarter. Revenues of $10.94 billion in the quarter eked out a +0.24% beat over expectations. Shares are up robustly, +5% this morning, adding to its +4% gains year to date. For more on TRV’s earnings, click here.
Chicago Fed President and frequent guest on CNBC’s “Squawk Box” Austan Goolsbee said this morning “a lot of progress has been made on the ‘golden path’ (toward a soft-landing in the economy) in 2023,” but that inflation reads are key for the Fed’s interest rate path. “If we continue to make surprising progress faster than was forecast on inflation, then we have to take that into account…” In other words, a rate cut is on the table, but the economy would need to continue outperforming expectations on the inflationary ramp-down.
Goolsbee appreciates that “Goods prices have returned to mild deflation levels we saw pre-Covid,” along with “surprising levels of Services inflation” having come down, but that the Fed needs to see more improvement on housing prices coming down prior to the Fed taking interest rates down from the 5.25-5.50% range. We’ve kept these levels since the late-July Federal Open Market Committee (FOMC) meeting last year. Many chips currently remain on a pending March rate cut, with 3-4 cuts overall this year (down from 6-7 previously anticipated).
After today’s open, we’ll get a preliminary read on Consumer Sentiment for January, where expectations are for 69.7 — steady with the prior month’s print, and nicely above the cycle low of 59.0 back in May of last year. Elsewhere, Existing Home Sales for December are expected to tick up to 3.83 million, and further off cycle lows from October. However, it is widely expected to mark the fourth-straight sub-4 million monthly tally of existing home sales.
Also, Fed Vice Chair Michael Barr will make an appearance, as will San Francisco Fed President Mary Daly. These will be the final official words from the Federal Reserve prior to the “blackout period” ahead of the next FOMC meeting beginning January 30th. Currently, even the most dovish prognosticators do not foresee an interest rate cut at that meeting. But even the following one in March now only sees a 50/50 chance of a rate cut, according to the latest survey.