Stansberry Research

Tuesday Afternoon Market Recap

Stansberry NewsWire

Tuesday Afternoon Market Recap:

U.S. equity markets finished mixed.

Economic Indicators

  • New York Fed Empire survey showed a big headline contraction for January, with a reading of negative 32.9, compared with expectations for negative 9.0 and December's negative 11.2. This is the lowest level since mid-2020 and the fifth-worst reading in history. On a positive note, prices paid continued to decline as inflation pressures keep easing.
  • Bank of America's Global Fund Manager survey says that investors are less bearish than last month due to China's reopening, easing global inflation, and the Federal Reserve approaching peak rates. However, the survey also showed the largest percentage of underweight holdings of U.S. equities since 2005.

Macro Commentary

  • Morgan Stanley's (MS) CIO Mike Wilson reaffirmed his pessimistic outlook for U.S. stocks, saying margins and earnings are likely going to disappoint and reset guidance lower.
  • Goldman Sachs (GS) and Morgan Stanley reported major earnings misses as a barren merger and acquisition landscape hurt both firms.
  • The U.S. is expected to hit a debt ceiling by Thursday as Secretary of the Treasury Janet Yellen warns congress of ramifications.
  • Investors look forward to the rest of the holiday-shortened week, with Produce Price Index ("PPI") figures, retail sales, and housing data on deck.

Within the S&P 500 Index, seven of the 11 sectors finished lower...

European equity markets finished mixed.

Economic Indicators

  • The German ZEW Economic Research showed investor sentiment reached positive territory in January for the first time since early 2022 – before Russia invaded Ukraine.
  • The U.K.'s average weekly earnings were marginally higher as the tight labor market continues to serve as a headwind for easing inflation.

Macro Commentary

  • Bank of England Governor Andrew Bailey told lawmakers on Monday that labor market shortages could pose a sustained and real threat to the inflation outlook.
  • Bond markets surged following a Bloomberg report that said the European Central Bank ("ECB") would consider slowing rate hikes to 25 basis points following February's meeting.
  • ECB's Chief Economist Philip Lane continued to assert that the central bank must make further steps to firmly entrench rate policy into restrictive territory.

Asian equity markets finished mixed.

Economic Indicators

  • Japan's PPI grew at an annualized rate of 10.2% in December – a 42-year high as higher import costs and a weak yen continue to hinder producer margins.
  • China's fourth-quarter gross domestic product expanded 2.9% year over year beating expectations but falling short of the previous quarter growth rate of 3.9%.
  • Australian Consumer Confidence (Westpac-MI) continued to slowly climb in January, marking the largest monthly increase in confidence since early 2021.

Macro Commentary

  • China's population fell in 2022 by roughly 850,000 to 1.41 billion, marking the first decline since 1961.
  • The People's Bank of China indefinitely extended its relaxation of mortgage floor rates, as it tries to stabilize a weak property market.
  • Investors await any potential monetary policy ramifications to come from the Bank of Japan's meeting Wednesday.

(Narratives written as of local market close.)

Asset Snapshot

What we're paying attention to this week...

U.S.

  • PPI for December (W)
  • NAHB Housing Market Index for January (W)
  • Philadelphia Fed Manufacturing Index for January (Th)

Europe

  • U.K. – Consumer Price Index ("CPI"), PPI for December (W)
  • Germany – PPI for December (F)

Asia

  • Bank of Japan Policy Decision (W)
  • China – One- and Five-Year Loan Prime Rates (F)
  • Japan – CPI for December (F)

(Day of week in parentheses.)

Have a great evening!

C. Scott Garliss and Kevin Sanford