Stocks End The Week On A High Note, But This Week Is Make Or Break

80+ S&P 500 companies report their latest earnings this week

Author

Mark Roussin
January 23, 2023

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Market Talk ⏪

We are off and running with big banks kicking off earnings season this past week. We saw all the major banks increase their credit loss reserves yet again, essentially indicating they are prepared for the likely recession.

This week is jam packed with tons of earnings, roughly 20% of the S&P 500 will have reported their earnings at the conclusion of this week. On top of that, we will get some key economic data such as a fresh GDP reading as well as another look at unemployment.

It has been interesting over the past 12 months because everything has been focused on the Fed, whereas earnings have taken a backseat. However, now that we have had two full quarters of Fed hikes working their way into the system, investors can really start to get an idea both on how they are impacting those businesses and how management sees the business and economy shaking out in 2023.

We got another wave of layoffs from tech giants this past week as Alphabet (GOOGL) announced 12,000 jobs would be eliminated with Microsoft (MSFT) laying off 10,000 employees themselves. These both came after Amazon (AMZN) announced 18,000 job cuts at the start of the year. However, this sector hired big time during the pandemic as demand surged and they needed to keep up, so the current cuts appear more like the companies are rightsizing rather than downsizing due to economic uncertainty.

The Fed has signaled they may stick to a slower hiking pace, so going forward, 25 basis point hikes appear more likely moving forward.

Now that true earnings season is getting underway, this is the period I have been discussing a few times within this newsletter, and that is the analysts and company revisions downward for 2023 estimates. The S&P 500 still trades at a P/E ratio of 20x, which is well above their historical average, so if estimate revisions come down, that means the “e” in the equation would reduce, which would result in share prices also needing to rightsize. This is something that continues to be put on the shelf and not discussed enough and investors need to be aware of it.

As you well see in the analysts update section down below, we are starting to already see downgrades and price cuts for many stocks.

Last week, markets surged into the close and we saw the Nasdaq close the week on a positive note. However, volatility remains low with the VIX sitting right around 20, which has been a good time to trim some positions over the past 12 months. Some rough earnings or weak guidance this week could certainly reignite volatility in the week(s) to come.

In the real estate sector, we continued to see a battered and bruised homebuilding sector that saw home sales decline for the 11th consecutive month, and they are now at levels last seen in 2010. Pricing still remains high as do interest rates, give no sign of reprieve in the near future.

I will be busy this week keeping up with all the earnings releases and earnings calls, but if you are a premium subscriber, be on the lookout for a Deep DIve and Earnings summary report.

Deep Dive 📰

Become a premium subscriber today for ONLY $1 PER DAY. Premium subscribers receive the following:

  • Monthly Portfolio Updates

  • Earnings Recaps

  • 2 Individual Stock Deep Dives Per Month

  • And More

This week will be jammed packed with some earnings summaries and a new DEEP DIVE. Our latest Deep Dive was on Johnson & Johnson. Check it out here.

If there is a specific stock you would like me to consider for a future Deep Dive, then send me an email at [email protected] and I would be happy to consider it.

US Markets 🇺🇸

Here is a performance summary for US Equities:

Here is a look at US Treasuries:

The Fear & Greed Index measures market sentiment based on the following seven factors: put/call ratios, junk bond demand, stock price breadth, market volatility, stock price strength, safe-haven demand, and market momentum.

When it comes to the Fear and Greed Index, we have seen the S&P 500 get off to a great start to the year, which has reversed this index from Fear a few weeks back to Greed today. Over the past week though we have seen little change heading into a HUGE week of earnings. Currently, the index has a reading of 59, which is roughly flat from the prior week reading of 63.

Earnings on Deck 💰

Last week big banks launched the Q4 earnings cycle and this week is a HUGE portion of the S&P 500, with every day loaded with big names we will be watching.

Notable Analyst Updates 📝

  • Citi downgrades Morgan Stanley to hold from buy

  • Credit Suisse increases PT on Morgan Stanley to $102

  • Wells Fargo cuts PT of Goldman Sachs to $390

  • UBS cuts PT of UnitedHealth Group to $550

  • JPMorgan cuts PT of Apple to $180

  • Citi increase PT of Starbucks to $111

  • Jeffries upgrades Philip Morris from hold to BUY

  • Morgan Stanley names Apple a top 2023 pick

  • Redburn downgraded Exxon Mobil to SELL

  • Morgan Stanley upgrades Domino’s to BUY

  • Wells Fargo downgrades Pfizer to hold

  • Guggenheim with a rare SELL rating on shares of Microsoft

This Week 📆

Monday

  • Leading index

Tuesday

  • S&P Global Manufacturing PMI

  • S&P Global Services PMI

Wednesday

  • No economic data

Thursday

  • Initial jobless claims

  • Durable goods

  • Real GDP

  • Advance economic indicators

  • New home sales

Friday

  • Personal income/spending

  • Pending home sales

  • Consumer sentiment

Other Resources 📺

If you have not done so yet, definitely check out my growing YouTube community where I publish weekly videos on Dividend Stocks I am looking at.

Here is a look at my latest video in which I discuss the Dogs of the Dow:

I also recently published a video covering ETFs SCHD vs JEPI:

Here are a few others of my latest videos:

If you enjoyed the newsletter, leave a LIKE and COMMENT down below. Also, if there is someone that could benefit from this newsletter, consider sharing it.

Have questions? You can email me directly at [email protected].

Happy Investing!

Mark

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