Start Your Engines For Earnings Season

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Key Takeaways

• Tech Stocks Begin Year On Shaky Ground
• Earnings Season Begins This Week
• More Problems For Boeing

Stocks got off to a bumpy start for the year. Through the first week of trading, the S&P 500 fell 1.5% while the Nasdaq Composite dropped 3.2%. Bonds also saw selling pressure with the yield on the benchmark 10-year note climbing back above 4%. Economic data and earnings season are both about to pick up so we’ll see if last week’s performance was a harbinger of things to come or just some early year profit taking.

There was widespread weakness last week, but tech stocks took it particularly hard. Shares of Apple
AAPL
fell nearly 6% and are sitting just above long-term support at $179. AmazonAmazon” data-type=”stock”>
AMZN
shares were down nearly 4.4%. Google
GOOG
lost just under 3% and shares of Tesla
TSLA
were off by 4.4%. Over the weekend, an article in the Wall Street Journal discussed board member concerns regarding drug use by Elon Musk and his ability to run multiple companies.

Last Friday’s employment report initially looked stronger than expected. However, upon digging deeper it seems as if job growth isn’t quite as strong as topline numbers suggest. The prior two months saw downward revisions, which was a theme throughout most of 2023. A quarter of the new jobs reported were in government and jobs gains were heavily concentrated in part-time jobs. Despite the underlying weakness in the report, expectations of a rate cut in March fell to 65% from 73%, according to the CME. This week will have its fair share of economic data to digest including the Consumer Price Index (CPI) and Producer Price Index (PPI). We’ll also hear from a host of Fed members throughout the course of the week.

In addition to the economic data being released, earnings season will also begin this week. Blackrock, Delta, JP Morgan Chase, and United Healthcare are all scheduled to report. We’re still a few weeks off from the big name tech stocks, but the early reports could weigh on overall market valuations which have risen of late.

According to FactSet, the 12-month forward looking P/E for the S&P 500 is currently 19.2, above its average of 18.9. Earnings in the fourth quarter are expected to be up 1.3% year-over-year, down sharply from the 8% growth analysts were forecasting as recently as late September. That would put full year 2023 earnings growth at just 0.8%.

Taking a quick look at some stocks in the news today, shares of Boeing
BA
are indicated lower by 8% in premarket following a mid-air issue that saw part of a plane’s fuselage come off during a flight. Spirit Aerosystems, a main supplier of Boeing, is also indicated lower by 16%. Because the Dow Jones Industrial Average uses a price weighted formula vs. the S&P 500, which uses a market capitalization approach, the drop in Boeing stock is being more heavily felt by the Dow this morning. In premarket, the Dow is off 0.5% while the S&P 500 is unchanged. Looking forward at the rest of this week, I expect volumes levels to pick up as people return from vacation and the market digests the economic and earnings data. As always, I would stick with your investing plans and long term objectives.

tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.