Inflation came in below expectations, however some corporate earnings have been underwhelming. December’s core personal consumption expenditures (PCE) price index matched economists’ monthly predictions. Inflation fell by 2.9%, reaching its lowest 12-month rate since March 2021, suggesting that the Federal Reserve might start reducing rates in 2024. Consumer spending was robust, but personal savings rates declined.
After lackluster earnings reports, stocks are struggling to maintain the recent stock market run. Intel’s (INTC) stock plunged nearly 11% in premarket trading due to weak fiscal first-quarter projections. KLA Corp’s (KLAC)shares also dropped over 3% after announcing lower-than-expected revenue and earnings per share for the third fiscal quarter. Additionally, Visa’s (V) shares decreased more than 2% after reporting a slowdown in U.S. transaction volumes.
Attention is now on several major companies, including Chevron (CVX), Caterpillar (CAT), and Pfizer (PFE), which are due to release their earnings today. Positive reports from these companies could enhance market confidence.
As the market shifts towards growth, earnings are becoming a crucial factor. Revenue expansion is essential for growth. Over the past two years, value stocks provided stability, but growth relies on increasing revenue. The tech sector, a key economic driver, is now being evaluated more on earnings, as seen in the declines of Intel (INTC) and Tesla (TSLA) shares.
The S&P 500 and Nasdaq Composite have risen for six consecutive sessions. The S&P 500 has set record highs for five consecutive trading days, the longest streak since November 2021. Market sentiment is strong, bordering on exuberant. Despite a remarkable three-month rally, investors should brace for a potential near-term downturn. Risk management remains crucial, and investors are advised to maintain discipline and patience.
- Lower-than-expected inflation eases Fed hawkishness, paving the way for potential rate cuts later this year. Consumer spending also shines, despite a dip in savings.
- Tech giants like Intel (INTC) and Visa (V) stumbled, raising concerns about broader sector weakness and dampening the market’s euphoria.
- Focus with the market transitioning from value to growth, earnings become the key performance indicator. Strong reports from Chevron (CVX), Caterpillar (CAT), and Pfizer (PFE) could be the next catalyst for the rally.
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