Markets This Week, 01/29-02/02, 2024: Data is the King

Economy and Markets: The Week Ahead

The S&P 500 (SPX) index snapped its five-day bull run on Friday, closing in the red. Intel’s (INTC) weak revenue forecast led to a sharp sell-off in the stock, weighing on tech shares. The Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) both slipped. At the same time, the Dow Jones Industrial Average (DJIA) was the only major index to finish the day in the black, propped by an American Express (AXP) surge to an all-time high due to a positive 2024 guidance and a dividend increase.

Despite Friday’s weakness, all four indexes were up for the week, lifted by stronger-than-expected economic data, which seems to confirm the “Goldilocks” economic scenario of robust growth and lower inflation. The advance estimate for the fourth quarter’s economic growth came in at 3.3%, far exceeding the estimates of 2%. At the same time, the Federal Reserve’s preferred inflation measure, Core PCE, slowed to a 2.9% annual pace, below the estimates of 3%.

While these figures reflect the best economic situation the U.S. has seen since the onset of the Covid-19 pandemic, they cloud the outlook for the Fed’s rate cuts. Although inflation has been continuously trending downwards, the economy’s strength in the face of the high-interest rates underscores the lack of urgency to ease monetary policy. In addition, the stock market’s formidable rally in the past three months has led to a significant easing of the financial conditions. Policymakers prefer to make sure that the revitalized flow of money through the economy doesn’t rekindle inflation.     

Even before the latest data points came out, traders had pushed their monetary easing predictions from March to May. This outlook will be updated numerous times, as it hinges on further economic reports. Specifically, this Friday we will receive another essential piece of the economic jigsaw puzzle: the payrolls and unemployment report, which can influence the expected rate-cut timetable. Further down the road, the Fed will need to receive decisive confirmation that the economy has cooled down enough to prevent another spike in prices.

At the Federal Open Market Committee (FOMC) meeting on January 30-31, the members are nearly certain to keep the rates unchanged. However, the meeting is expected to be closely followed by investors watching for clues about the timing of the Federal Reserve’s prospective cuts.

In this uncertain environment, investors are strongly advised to follow economic reports closely, and to base their decisions on trustworthy data and analysis.

Upcoming Earnings and Dividend Announcements

Several important earnings releases are scheduled for this week, with tech firms making up the bulk of the large- and megacaps’ reports.

The most important market-moving event will be the release of fourth-quarter earnings of the “Magnificent Seven” group members Alphabet (GOOGL), Microsoft (MSFT), Amazon.com (AMZN), Apple (AAPL), and Meta Platforms (META).

Other notable earnings reports this week will be published by SoFi Technologies (SOFI), Super Micro Computer (SMCI), Advanced Micro Devices (AMD), Electronic Arts (EA), General Motors (GM), Starbucks (SBUX), Qualcomm (QCOM), Microchip Technology (MCHP), and AbbVie (ABBV).

Companies’ reporting dates, consensus EPS forecasts, past data, analyst ratings, and price targets can be found on the TipRanks Earnings Calendar.

This week, Ex-Dividend dates are coming for Conagra Brands (CAG), Texas Instruments (TXN), Morgan Stanley (MS), Enterprise Products Partners (EPD), Kinder Morgan (KMI), Realty Income (O), Costco (COST), Wells Fargo (WFC), Citigroup (C), MPLX LP (MPLX), and other dividend-paying firms.

Companies’ Ex-Dividend and Dividend Payment dates, analyst ratings, and price targets can be found on the TipRanks Dividend Calendar.

Upcoming Economic Calendar Events

There are several critical reports scheduled to be published in the next few days:

» January’s ISM Manufacturing PMI – Thursday, 02/01 – This report, released by the Institute for Supply Management, shows business conditions in the U.S. manufacturing sector. It is a significant indicator of the overall economic conditions. PMIs are considered one of the most reliable leading indicators for assessing the state of the U.S. economy, helping analysts and economists anticipate changing economic trends.

» January’s Michigan Consumer Sentiment Index and UoM 5-year Consumer Inflation Expectations – Friday, 02/02 – These reports, published by the University of Michigan, portray the results of a monthly survey of consumer confidence levels and consumer views of long-term inflation in the United States. The level of confidence affects consumer spending, which contributes about 70% of the U.S. GDP. The inflation expectations index is one component that goes into the Fed’s calculations of the Index of Inflation Expectations.

» January’s Nonfarm Payrolls and Unemployment Rate – Friday, 02/02 – The Nonfarm Payrolls and Unemployment reports, released by the U.S. Bureau of Labor Statistics, present the number of new jobs created during the previous month, along with the percentage of people that were actively seeking employment in the previous month. These reports are considered two of the more important economic indicators, as policymakers follow the shift in the number of positions since it is strongly associated with the health of the economy as a whole. One of the mandates of the Federal Reserve is full employment, and it takes labor market changes into account when determining its policy decisions.

Current and scheduled economic reports, Fed statements, and other releases, as well as analyses regarding their potential impact on the stock markets, can be found on the TipRanks Economic Calendar.