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The stock market is getting a chance to catch its breath after the big swings last week driven by megacap earnings and a surprising jobs report.
S&P (SPX), Nasdaq 100 (NDX:IND) and Dow Jones (INDU) futures are slightly lower.
“Global markets started the year on the wrong foot, with the US in the uncharacteristic position of leading major market declines,” eToro’s Ben Laidler wrote. “This took our S&P 500 year-end target of 5,050 clearly into double-digit return territory. The pullback has only improved the risk/return. We see a lower return and more volatile year, but higher earnings more than offsetting lower valuations.”
“It is a new world, and different assets will do better.”
“We normally see three 5% pullbacks a year, and a bigger 10% correction every 18 months,” Laidler added. “These have been rarer recently, but they happen regularly, and history favors buying them. Markets usually recover reasonably quickly. The exception is in recessions. We do not see a recession, with GDP growth still well above average.”
“Market yield curves, which are the best recession indicators, are comforting. A January fall only leads to a down year a third the time. January 2009 and 2019 declined but were strong overall years.”
The 10-year Treasury yield is down 1 basis point to 1.92%.
The economic calendar is fairly empty this morning and things won’t really pick up until Thursday’s CPI.
“In terms of what to look out for, note that 8 of the last 10 CPI releases have seen the monthly headline figure come in above the consensus estimate on Bloomberg,” Deutsche Bank’s Jim Reid said. “Our US economists are projecting that monthly headline CPI growth will slow to +0.36% in January, with core inflation also slowing to +0.36%.”
“However, this would still push YoY readings to 7.2% and 5.8% (consensus at 7.3% and 5.9%) respectively the highest since 1982 for both,” Reid said. “There are plenty of wildcards in the release but we’ll be watching rents/OER most as this makes up around 40% of core and around a third of the headline number.”
“Since last summer it’s been clear from our models that this was going to continue going up and up and given its weight it’s very difficult for inflation to mean revert without it also doing so. It’s showing no sign of this at the moment and likely won’t for several months at least.”
Among individual stocks, Peloton is up more than 20% premarket …….
Source: https://seekingalpha.com/news/3796368-dow-jones-sp-nasdaq-futures-dip-after-a-hectic-week
