Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Thursday, Jan. 25, 2024. The Bottom Line segment of today’s podcast starts at (4:26) for listeners who want to skip ahead.
State of Play
Stocks didn’t do much yesterday. The S&P 500 closed higher, barely (by 0.08%), for a new all-time high but otherwise it was a pretty quiet day. Tesla (TSLA 0.00%↑) earnings after the close were a major disappointment, but IBM (IBM 0.00%↑) was positive. As we look at our board of indicators at 0635 things are pretty quiet ahead of more earnings and Q4 GDP:
Stock index futures are pointing to modest gains led by small caps, with the Russell 2000 up 0.3%. Nasdaq and S&P are flat however;
Commodities are showing some signs of life with WTI crude oil up 1.5% to trade north of $76/barrel, which is the highest level it’s been in weeks. Copper is up 0.2%;
Bonds are seeing a few bids, with the 10-year yield down 2 basis points to 4.16% (yields move inversely to prices).
Economic Data
The major release of the day is fourth-quarter GDP, out at 0830. Economists who were surveyed expect annualized growth of 2.0%, significantly less than the 4.9% recorded for Q3. The GDP Price Index is expected to advance by 2.3% versus 3.3% at the last reading, another sign that indication is cooling. There’s a quarterly Core PCE figure that’s part of this report as well and that is expected to show an increase of 2%, the same as last quarter.
Durable goods orders are also due at 0830. The expectation here is for an increase of 1.1% month-over-month, a significant drop from the 5.4% recorded last month.
Seeing how it’s Thursday we’ll get initial jobless claims at 0830 as well. Economists expect an even 200,000 new claims, an increase from the 187,000 recorded last week — which as it turns out was the lowest reading in almost a year.
Earnings
Another big day for earnings and these are starting to trickle in. Nokia (NOK 0.00%↑) is trading higher after it announced a buyback program. Dow Chemical (DOW 0.00%↑) beat on top- and bottom line estimates.
We’re waiting to hear from American Airlines (AAL 0.00%↑), Southwest Airlines (LUV 0.00%↑), Alaska Air (ALK 0.00%↑), Valero Energy (VLO 0.00%↑), Blackstone (BX 0.00%↑), Sherwin-Williams (SHW 0.00%↑), and Northrop Grumman (NOC 0.00%↑), among others.
After the close this afternoon Intel (INTC 0.00%↑) and Visa (V 0.00%↑) report.
The Bottom Line©️
GDP should not really be a market-moving event seeing how it captures something that happened months ago and which has only minimal impact on what’s to come. If GDP were measured on a monthly basis it might be more valuable. That said, there is of course something about the rate of change in economic growth. You can be sure the Fed will be watching this. If Q4 GDP was anywhere near Q3 levels then the case for a rate cut becomes even more difficult to make. Or at the very least it should be pushed back further from where it is now, which is May’s FOMC meeting according to Fed fund futures.
Where that leaves stocks is anybody’s guess. One would figure that at some point maybe positive economic news will trump rate cut hopes, which makes sense seeing how the former is ultimately better for corporate earnings in the long term. Too bad about Tesla but the 8% drop we’re seeing overnight still leaves it above its 52-week low. That’s $152 if you’re keeping score and TSLA is trading around $191 this morning…
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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Q4 GDP, More Earnings