This Week, U.S. Stock Trends Driven by Dominant Earnings Reports and Data

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Written By Rahul Chandak

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Stock Market Resilience in 2024:

After a nine-week consecutive rise at the beginning of 2024, the stock market resumed its upward trajectory, marking a positive start to the year.

Major Stock Index Gains:

All three major stock indexes recorded gains in the first full trading week. The Nasdaq rose by an impressive 3%, while the S&P 500 saw a modest increase of 0.3%. Notably, Microsoft surpassed Apple to claim the title of the world’s most valuable company.

Continued Momentum Amidst Holidays:

Investors are eagerly anticipating the continuation of this positive momentum in the holiday-shortened week, with the U.S. market closed on the 15th for Martin Luther King Jr. Day.

Key Catalysts for the Week:

Focus will be on financial industry earnings reports and retail sales data on the 17th as the primary catalysts shaping market movements this week.

Retail sales are expected to rise by 0.4% in December, indicating the resilience of U.S. consumers and contributing to the surprising economic expansion.

Banking Perspective on Economic Outlook:

Bank of America economist Michael Gapen anticipates strong seasonally adjusted retail sales data for December, affirming that spending remains healthy though not surging. The bank predicts a fourth-quarter annual GDP growth rate of 1.2%.

Other economic data to watch includes initial unemployment benefits data on the 18th and University of Michigan consumer confidence data on the 19th.

Goldman Sachs and Morgan Stanley are set to release results on the 16th, offering insights into the performance of the investment banking industry after a challenging year.

Inflation Concerns and Market Impact:

Recent inflation data revealed firmer-than-expected consumer prices in December. Concerns about disruptions related to the Red Sea pose “upside risks” to inflation forecasts.

Investors closely monitor whether inflation data will influence the Federal Reserve’s plans to cut interest rates in 2024. CME Group data shows a 77% chance of a 1 percentage point rate cut in March.


Technology Stocks in the Spotlight:

As earnings season begins, the focus shifts to technology stocks, especially the “Big Seven,” which significantly influenced the Nasdaq’s 40% rise in 2023.

Forward price-to-earnings ratio data from the Bank of America places the technology industry second among all stocks. These results will have a substantial impact on the S&P 500 due to technology stocks comprising over 28% of its market capitalization.

Earnings Season Expectations:

FactSet data reveals that negative financial forecasts for the fourth quarter are slightly higher than historical averages, with the technology industry having the highest proportion of warnings.

“Big Seven” Dynamics:

For the “Big Seven,” Meta Platform and Alphabet are in the communication services sector, while Amazon and Tesla fall under consumer discretionary. The performance of these stocks will significantly influence investor confidence and the overall direction of the S&P 500.

Anticipation for Fourth-Quarter Earnings:

Given the pivotal role tech trading played in investors’ minds last year, the eagerly awaited fourth-quarter earnings season will provide crucial insights as these stocks release their reports.

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