The Week That Was, The Week Ahead: Macro & Markets, February 4, 2023

Everything to Know about Macro and Markets

The S&P 500 (SPX) index rose for the fourth straight week, closing at an all-time high for the third consecutive week and inching less than 1% from crossing the 5,000 level for the first time in its history. The Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) rallied, shaking off a slide in Apple (AAPL) on weak Chinese sales, as they were propelled by a surge in Meta Platforms (META) and Amazon (AMZN).

Stocks overcame Wednesday’s loss, the worst in four months, which came on the back of the Fed’s strong rebuttal of a March rate-hike possibility, as well as on weaker-than-expected results and guidance from Alphabet (GOOGL) and Microsoft (MSFT).

Tech, Economy Push Markets Upward

META skyrocketed after the Facebook owner reported better-than-expected profits, posted a favorable Q1 projection, announced plans to widen buybacks, and declared its first-ever dividend. Its shares jumped by almost 20% on Friday alone, making history with the largest-ever daily market cap increase of $200 billion. Its fellow “Magnificent Seven” member AMZN popped almost 8% on the week after it reported beating its revenue and earnings in the previous quarter.

All main indexes, including the Dow Jones Industrial Average (DJIA), were also firmly supported by significantly stronger-than-anticipated labor market data. The robust payroll growth and accelerating wage increases signal a longer path to the Federal Reserve’s easing, denting policymakers’ confidence that inflation is under control. However, before the report was published, Chairman Powell had already as much as committed that there would be no cuts in March, thus negating its negative impact on investors’ outlook. Meanwhile, a strong job market provided another argument in support of the “Goldilocks economy” thesis. The report also reflected increased worker productivity, meaning that faster job growth may be possible without stoking inflation.

Economy is Robust, but Danger Looms for Banks

All major economic reports released in the past week, from Consumer Confidence to ISM Manufacturing, were better than expected, pointing at robust, re-accelerating economic growth. Among the sea of positivity, stock markets ignored fresh concerns brewing around regional banks, as a tumble in shares of New York Community Bancorp (NYCB) following its unexpected quarterly loss and a material dividend cut. Almost a year after the regional banking crisis, worries resurface, with the culprit now being the lenders’ exposure to the commercial real estate (CRE).

CRE, especially office properties, have never recovered from their pandemic slump and is not expected to recover according to strategists. Now, the $2.7 trillion in commercial real estate loans weigh on regional and smaller banks’ balance sheets. We at TipRanks have warned against “buying the dip” in regional banks, among other reasons because of their high exposure to CRE. The slow-motion crisis is still in its early stages, with about $560 billion of CRE loans, many of which are underwater, maturing this year and next.

This week will be relatively light on economic data, which will allow investors to digest the details of the economic reports already published and concentrate on earnings releases. In addition, several Federal Reserve members are scheduled to speak this week, with investors digging into their speeches in search of additional clues regarding their monetary policy outlook.   

In this uncertain environment, investors are strongly advised to follow economic reports closely and to base their decisions on trustworthy data and analysis.

Current and scheduled economic reports, Fed statements, and other releases, as well as analyses regarding their potential impact on the stock markets, can be found on the TipRanks Economic Calendar.

Upcoming Earnings and Dividend Announcements

Several important earnings releases are scheduled for this week. The most market-moving event will be the earnings release of a megacap drugmaker Eli Lilly (LLY).

Other notable earnings reports this week will be published by McDonald’s (MCD), Walt Disney (DIS), Caterpillar (CAT), NXP Semiconductors (NXPI), Vertex Pharmaceuticals (VRTX), Ford Motor (F), Linde (LIN), Alibaba (BABA), CVS Health (CVS), PayPal Holdings (PYPL), and PepsiCo (PEP).

Companies’ reporting dates, consensus EPS forecasts, past data, analyst ratings, and price targets can be found on the TipRanks Earnings Calendar.

This week, Ex-Dividend dates are coming for ASML Holding (ASML), Metlife (MET), Intel (INTC), Schlumberger (SLB), Constellation Brands (STZ), Archer Daniels Midland (ADM), Visa (V), International Business Machines (IBM), and other dividend-paying firms.

Companies’ Ex-Dividend and Dividend Payment dates, analyst ratings, and price targets can be found on the TipRanks Dividend Calendar.