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“You have to work hard in the dark to shine in the light” – Kobe Bryant

Morning stock market summary

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It was looking like a rough end to the week late last night and into this morning as futures dipped following some weak earnings after the close yesterday from the likes of Intel (INTC), KLA-Tencor (KLAC), and Visa (V), but it started to show some improvement as Europe opened for trading. Right now, S&P 500 and Dow futures are flat to slightly lower, while Nasdaq futures are a bit further below the flatline due to the 10% pre-market decline in shares of Intel (INTC). In the energy space, crude oil is down about 1% after a rally stalled out at its 200-DMA yesterday.

The week’s last batch of economic data included Personal Income and Personal Spending, PCE Deflator (all at 8:30), and Pending Home Sales at 10 AM. Personal Income was right in line with estimates (0.3%), and Personal Spending came in stronger than expected (0.7% vs 0.5%). On the inflation front, the headline PCE Deflator was right in line with forecasts on a m/m and y/y basis. On a core level, the m/m reading was inline (0.2%), but the y/y reading was better than expected, falling to 2.9% versus forecasts for an increase of 3.0%. Net net, this data continues to a backdrop of growth with receding inflation.

Heading into the last four trading days of January, the S&P 500 is up 2.6% YTD which is the strongest start to a year since…last year when the S&P 500 rallied over 5% at this point in the year. In the charts below, we summarize the performance of the S&P 500 during the last four trading days of January since 1953 (which is the first full year of the NYSE five-trading day week in its current form). As shown, in years in which the S&P 500 was down over 2%, median returns for the rest of the month were a gain of 0.14% with positive returns 55% of the time. In the 11 years when the S&P 500 was down less than 2%, the median return in the last four trading days was a decline of 0.27% with gains just 36% of the time. In the years when the S&P 500 was positive to start the year, though, January tended to finish off the month on a more positive note with gains over two-thirds of the time.

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