The January market rally faces a major test over the coming week from several major events, the most important of which could be the Federal Reserve interest rate announcement and press conference. The Fed’s Tuesday and Wednesday meeting comes amid a barrage of corporate earnings reports, with about 20% of the S&P 500 reporting this week. The key day for earnings is Thursday, when Apple, Alphabet and Amazon report after the bell. There is also important economic data with the employment cost index to be released in the January jobs report on Tuesday and Friday. Both will be watched for signs of how much the central bank has cooled the labor market with its rate hike. That could give a rough guide to how much more the Fed will try to raise rates. “Markets are at an inflection point,” said Keith Lerner, co-chief investment officer at Truist Advisory Services. “I think it’s going to be a critical week. We’re still on the defensive, but there are a lot of key data points that could transform this market.” Stocks have rallied since the beginning of the year, with the most battered names outperforming. Two big losers in 2022, technology and communications services, have led the market higher and are on course for double-digit gains this month. The Nasdaq Composite was up 11% for the month on Friday afternoon, well above the S&P 500’s 6.5% rise in December. The index closed at 4,070 on Friday, up 2.5% for the week. .SPX 1Y line s and p “We are at the top of this trend line. We will either break out in a convincing manner or we will turn back,” said Lerner. “We’re going to get what matters most to this market — the Fed and earnings.” According to Refinitiv, earnings to date have beaten expectations by about 68%, but some of the forecasts have been troubling. “For every great report, American Express, Chevron, there’s a company that gets a slap in the face like Intel,” said Art Hogan, chief market strategist at B. Riley Financial. He said Apple, the largest market cap stock, has the potential to turn the market one way or the other. “You have a company that abruptly sold off to $125 earlier in the year and is now closer to $150. The award isn’t geared toward perfection, but the award is geared toward better news, a punch, and a raise,” Hogan said. “If there’s one company that has the potential to mess up the apple cart, it’s that one – pun intended.” AAPL 1Y line apple Apple is also important for the signals it gives about consumer strength, supply chains and reopening China can send. Fed ahead The Federal Reserve is widely expected to hike interest rates by a quarter point on Wednesday afternoon, although it is not expected to make any further changes to its outlook or forecasts. The Fed has hiked interest rates seven times since last March and its interest rate target range is now 4.25% to 4.5%. “As of this writing, they have yet to double,” said Diane Swonk, chief economist at KPMG. “The Fed is in an awkward position of sticking to its hawkish stance, even as it debates internally what the broader hawkish territory is, how far it will go.” Swonk said Fed Chair Jerome Powell is unlikely to be definitive comment on a slowdown in rate hikes, although markets still expect policymakers to stop soon and even cut rates by the end of the year. “Right now we’ve moved into restrictive territory,” Swonk said. “The risk they fear is a repeat of 2021… where they were fooled headlong and suddenly inflation picked up again.” She expects March to fuel internal debate over how far the Fed will go with its rate hikes will. By then it should have more insight into whether inflation is really cooling and whether the labor market is weakening. The Fed is forecasting a rise in the unemployment rate that could cool both the economy and inflation. “They can’t signal that they’re going down unless we get a more definitive inflation move that’s going down fast,” Swonk said. “The job data is important, ECI [employment costs] is important. … Consumers weakened in the fourth quarter. The downward revision in consumer spending that set the stage for weaker growth in the first quarter.” Swonk expects slower job growth in January, but she said the jobs report could still show about 200,000 jobs created as a result of corporate labor hoarding “The jobs report is in the precarious position of needing to get worse,” Hogan said, giving the central bank a chance to start positioning to end its walking cycle, according to Oil Drilling One Committee of OPEC+ ministers meets on Wednesday, but the group is unlikely to recommend any action on production levels after OPEC+ announced a 2 million barrels-per-day cut last fall, which is made up of OPEC, Russia and other non-OPEC producers : “I don’t think they do anything will do. They will say they are monitoring the situation,” said John Kilduff, partner at Again Capital. He said what’s happening behind the scenes might be more interesting. “If anything comes out of the group, it’s dismay at Russia and all the cheap oil they’re selling to India and China,” he said. However, he doubts there will be public comment on the issue, and still finds ways into the world market at reduced prices. Oil prices have risen recently, partly on expectations that China’s reopening will boost demand. But West Texas Intermediate crude futures are down nearly 1% year-to-date, trading at $79.68 a barrel Friday, week ahead Monday Earnings: Whirlpool, Helmerich & Payne, Franklin Resources, Ryanair, NXP Semiconductors, SoFi , Canon, Samsung Tuesday Revenue: Caterpillar, Exxon Mobil, Amgen, General Motors, UPS, McDonald’s, Pfizer, PulteGroup, Electronic Arts, Advanced Micro Devices, Snap, Marathon Petroleum, International Paper, Moody’s, Corning, Manpower, Sysco, Stryker, Boston Properties, Oshkosh, Polaris, Spotify, Edwards Lifesciences, Canadian Pacific Railway, Match Group, Chubb, Mondelez, Owens-Illinois, MSCI, Phillips 66, Hawaiian Holdings, Western Digital FOMC meeting begins 8:30 a.m. Labor Cost Index (Q4) 9th :00 am S&P/Case-Shiller Home Prices (November) 9:00 am FHFA Home Prices (November) 9:45 am Chicago PMI (January) 10:00 am Consumer Confidence (January) 10:00 am Home Vacancy (Q4) Wednesday Earnings: Meta Platforms, Novartis, T-Mobi le US, Altria, GlaxoSmithKline, Peloton Interactive, Boston Scientific, Scotts Miracle-Gro, Waste Management, Netgear, Aflac, McKesson, TrueBlue, MetLife, Allstate, SLM, AmerisourceBergen, Brinker, Otis Worldwide, Thermo Fisher, Aflac, Qorvo, Johnson Controls Vehicle Sales (January) 8:15 am ADP Employment (January) 9:45 am S&P Global Manufacturing PMI (January ry final) 10:00 am ISM Manufacturing (January) 10:00 am Construction Expenses 10:00 am JOLTS ( December) 2:00 p.m. FOMC Statement 2:30 p.m. Fed Chair Jerome Powell Briefing Thursday Earnings: Apple, Alphabet, Amazon, Ford, Eli Lilly, Merck, Bristol Myers Squibb, ConocoPhillips, Intercontinental Exchange, Qualcomm, Starbucks, Gilead Sciences , Clorox, Harley-Davidson, Honeywell, Estee Lauder, Skechers, US Steel, Post Holdings, Cirrus Logic, Hartford Financial, Boyd Gaming , Shell, Air Products, Ball Corp., Tradeweb, Illinois Tool Works, Synaptics, Beazer Homes, Parker Hannifin, Canada Goose, Quest Diagnostics, Stanley Black & De cker, Lazard, Cardinal Health, Deckers Outdoor, GoPro 8:30 am Initially unemployed Claims 8:30 am Productivity and costs 10:00 am Factory orders Friday Revenue: Cigna, Aon, Church & Dwight, CBOE Global Markets, Regeneron Pharma, Sanofi, Zimmer Biomet, LyondellBasell 8:30 am Employment (January) 9:45 am S&P Global Services PMI (January final) 10:00 am ISM Services (January)
