Markets rally ahead of big tech earnings after the market close

Dow shot up 369, advancers over decliners better than 3-1 & NAZ jumped 197.  The MLP index was fractionally higher to the 264s & the REIT index soared 5+ to the 381s when interest rates dropped.  Junk bond funds went up along with the stock market & Treasuries were heavily bought, sharply reducing yields.  Oil slid back 1+ to the 74s & gold crawled up 4 to 2071 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Peloton (PTON) warned investors it is still months away from growing sales or turning a profit.  The retailer posted mixed results for its holiday qtr, as it lost slightly more money than expected but beat revenue estimates.  It also forecast weaker sales & a bigger loss than expected in its current qtr.  The company reported a net loss for the 3-month period that ended Dec 31 of 54¢ per share, compared with a loss of 98¢ per share a year earlier.  Sales dropped to $744M, down from $793M a year earlier.  The company issued dismal guidance for the current qtr & a tepid full-year sales outlook.  For its fiscal 3rd qtr, it expects sales of $700-725M, compared with an estimate of $754M.  The company expects its adjusted EBITDA loss of $20-30M, compared with an estimate of a loss of $2M.  “Our outlook is tempered by uncertainty surrounding our ability to efficiently grow Paid App subscribers and the performance of other new initiatives, as well as an uncertain macroeconomic outlook,” finance chief Liz Coddington wrote in a letter to shareholders.  Nearly 2 years into CEO Barry McCarthy’s tenure, PTON is showing some signs of progress, but is still falling short on his key targets.  Last Feb, McCarthy set a goal of returning the company to revenue growth within a year but PTON fell short of that.  The company now expects to reach that milestone in Jun at the end of the current fiscal year.  The stock tumbled 1.35 (24%).

Peloton shares plummet 20% as fitness company gives dismal outlook

US consumer confidence increased to a 2-year high in Jan amid slowing inflation & expectations that the Federal Reserve would start cutting interest rates soon. The Conference Board said that its consumer confidence index rose to 114.8 this month, the highest reading since Dec 2021, from a downwardly revised 108.0 in Dec.  The forecast called for the index rising to 115.0 from the previously reported 110.7.  "January's increase in consumer confidence likely reflected slower inflation, anticipation of lower interest rates ahead, and generally favorable employment conditions as companies continue to hoard labor,” said Dana Peterson, chief economist at The Conference Board.  "The gain was seen across all age groups, but largest for consumers 55 and over."

US consumer confidence rise to two-year high in January

Small business owners are more optimistic to start the year, even as they face persistent inflation & lending concerns, a new poll found.  75% of small business owners are optimistic about their financial trajectory in 2024, up from 68% a year earlier, according to a survey by Goldman Sachs 10,000 Small Business Voices, a policy advocate for small business owners.  Meanwhile, 28% of respondents rated the economy as good or excellent, up 9% from a qtr ago.  More than ½ of small business owners surveyed said they expect to create jobs this year & 62% reported they anticipate profits will increase.  The survey adds to a recent string of data showing consumers & businesses have started to grow more confident about the economy after a stretch where inflation was stubborn & borrowing became tougher.  “The fact that 75% of small business owners are optimistic is a remarkably high number, considering inflation continues to plague them, they continue to face access to capital challenges and workforce-related issues ... all of those challenges have been very sticky for the last few years with no real progress,” Joe Wall, managing director of gov affairs at Goldman Sachs, said.  The survey was conducted nationally in mid-Jan among more than 1400 small business owners.  The survey also asked respondents to rank the difficulty of the last 4 years.  Interestingly, small business owners found 2023 nearly as hard as 2020, the peak of the pandemic & a time when many companies could not operate.  35% of respondents said 2020 was their most challenging year, while 33% picked 2023.  Inflation is still a major concern for business owners, even as the rate of price increases falls.  71% of those surveyed reported inflationary pressures had increased over the last 3 months.

Main Street is more optimistic this year even as inflation persists, survey says

Gold closed with a gain as the $ turned lower, giving up gains that came after Federal Reserve chair Jerome Powell said cuts to US interest rates will not be coming in Mar, dashing market hopes for a quick end to high rates.  Gold for Apr closed up $3 to settle at $2071 per ounce.  The Federal Reserve's policy committee ended its meeting yesterday leaving interest rates unchanged as expected.  However, following the meeting Jerome Powell said he does not believe the central bank will be ready to begin cutting rates in Mar, disappointing investors & boosting the $.  However the gains proved fleeting as the ICE dollar index was last seen down 0.18 points to 103.09.  The Fed left rates unchanged at 5.25-5.50% & the statement tilted hawkish with a line added that said they won't ease until they have more confidence in lower inflation.  Powell started on a less hawkish note as he said that data doesn't need to turn down for cuts but just needs to keep on doing what it's doing.  However, he said that it's unlikely they will have enough confidence on inflation to cut in Mar.  Treasury yields were mixed, with the 2-year note was last seen unchanged at 4.209%, while the yield on the 10-year note was down 4.8 basis points to 3.871%.

Gold Closes Higher as the Dollar Gives Up Early Gains

West Texas Intermediate (WTI) crude oil closed lower, giving up early gains on uncertain reports Israel & Hamas agreed to a ceasefire.  WTI crude for Mar closed down $2.03 to settle at $73.82 per barrel, while Apr Brent crude, the global benchmark, was last seen down $1.73 to $78.82.  A report said the drop came on an Al Jazeera report, later deleted, that Israel agreed to a ceasefire.  The news service's own reports concluded negotiations are in early stages & no immediate agreement is expected.  OPEC+ staged its first Joint Ministerial Monitoring Committee meeting of the year, with the cartel agreeing to review 2.2M barrels per day of voluntary cuts put in place for the first qtr in early Mar, according to reports & confirming it may take additional measures to support prices when it meets again in early Apr.  However rising US production & inventories is offering a check to prices.  The Energy Information Administration said inventories unexpectedly rose 1.2M barrels as production rebounded to 13M bpd after falling by 1M bpd as a bitter cold snap froze equipment.  It does appear that of all the areas most affected, North Dakota's return to the US oil matrix not only saw crude oil inventories rise by 1.2mb against a poll draw of 217kb expected, but national crude production increased by 700kb, thus taking it back to the record 13mbpd as seen at the back end of last year & into the beginning of this year.

WTI Crude Oil Closes With a Loss on Reports of Ceasefire Between Israel and Hamas

The bulls returned to drive stock prices higher.  Big tech companies are reporting earnings shortly & expectations are riding high.  Now those companies will have to prove that buying stocks was justified.  At the same time Treasuries are rising, bringing lower yields & gold is near its recent record under 2100.  Tomorrow, the report on monthly earnings is also due.  It should be an interesting day in the stock market!

Dow Jones Industrials