The stock market’s win streak has ended. It was a wonderful run for nine weeks, but on the tenth week, the major indices rested, relenting to some profit-taking efforts that were led by the small-cap stocks and mega-cap stocks.
This week looks set to begin at least on a mixed track. Currently, the S&P 500 futures are flat and are trading in-line with fair value, the Nasdaq 100 futures are up 18 points and are trading 0.1% above fair value, and the Dow Jones Industrial Average are down 141 points and are trading 0.2% below fair value.
The issue with the Dow Jones Industrial Average futures stems in large part from a 7.7% decline in shares of Boeing (BA), which is selling off after its 737 MAX 9 jets were grounded for inspection in the wake of a scary fuselage blowout on an Alaska Airlines (ALK) flight. American Express (AXP) also has some culpability, trading down 1.3% on a Robert W. Baird downgrade to Underperform from Neutral.
Separately, fellow Dow components Merck (MRK) and Johnson & Johnson (JNJ) have announced some smaller acquisitions. Merck will acquire Harpoon Therapeutics (HARP) for $23.00 per share in cash for an approximate total equity value of $680 million, and Johnson & Johnson will acquire Ambrx Pharmaceuticals (AMAM) for $28.00 per share in cash for a total equity value of approximately $2.0 billion.
Stock market participants are taking a tentative approach overall, though, watching to see how the indices respond to last week’s selling interest and digesting a slate of sales and earnings guidance that has been released in front of the ICR and JPMorgan Healthcare Conferences being held this week. The Consumer Electronics Show is also on this week’s event docket.
The biggest item this week, though, may be the release of the December Consumer Price Index (CPI) on Thursday. This report is destined to be a driving factor of the market’s rate-cut expectations, just as the December Employment Situation Report and December ISM Services PMI were on Friday.
Notably, Dallas Fed President Logan (not an FOMC voter) said in a weekend speech that, because of easing financial conditions, the Fed “shouldn’t take the possibility of another rate increase off the table just yet.”
The Treasury market seems to have taken this remark in stride, supported somewhat by falling oil prices (-3.3% to $71.41/bbl) amid a Bloomberg report that Saudi Arabia is aiming to lower crude prices in all regions. The 2-yr note yield is down two basis points to 4.37% and the 10-yr note yield is up one basis point to 4.05%. Like stocks, Treasuries will also be waiting anxiously for the CPI release.
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Originally Posted January 8, 2023 – Market diverts attention to Boeing and CPI release
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