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“No man can tame a tiger into a kitten by stroking it.” – Dick Cheney, born 1/30/1941

Morning stock market summary

Below is a snippet of commentary from today’s Morning Lineup.  Start a two-week trial to Bespoke Premium to view the full report.  

There’s been a weakening tone in the futures market all morning, but the pace of decline remains relatively small with the S&P 500 indicated to open down less than 0.25%. At the same time, the Nasdaq is down even less.  The pace of earnings has picked up substantially, and we’re starting to see a lot of big winners and losers in pre-market trading.  Tech-related stocks are reporting some strong numbers while results from more industrial-oriented firms have been weaker.  There have been exceptions in each case, but that has been the overall trend.  Will it continue through the close this evening when Microsoft (MSFT) and Alphabet (GOOGL) report after the bell?  That’s the 5 trillion dollar question!

On the economic calendar, Case Shiller Home Price numbers will be released at 9 AM while Consumer Confidence and JOLTS will hit the wires at 10 AM.

Dallas Fed Manufacturing report. Huge miss.
KC Manufacturing. Miss
Richmond Fed Manufacturing. Miss
Philadelphia Fed Manufacturing. Miss
Empire Manufacturing. Huger than huge miss.

In case you hadn’t noticed, this month’s regional Fed manufacturing reports were a big disappointment not only on an absolute level but also relative to expectations.  Not only were all five reports negative (indicating contraction) but they were also all weaker than expected.  As we noted in a post yesterday, going back to 2011, the collective magnitude of the misses of the five reports was the third largest on record trailing only the months of December 2018 and March 2020.

Going back to 2012, when data and consensus expectations for all five regional Fed manufacturing indices are available, January was only the fourth time that all five reports were negative and weaker than expected.  As indicated in the chart below, the other occurrences were in October 2012, September 2015, and February 2016.  While these three months all occurred in the contact of a period of slack in the manufacturing sector, none of them were indicative of recessions, and forward returns for the S&P 500 were positive.

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