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“I would rather hire a man with enthusiasm, than a man who knows everything.” – John D. Rockefeller

Morning stock market summary

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Futures are lower heading into the last trading day of the month, but they’re well off their lows of the morning. Treasury yields and crude oil are also lower but like equities, are off their lows of the morning.  The Q4 Employment Cost Index was just released and came in at a level of 1.0% versus forecasts for a reading of 1.1%. That’s the third straight quarterly decline from a multi-decade peak in Q1 of 2022, and while it won’t change what the Fed does at its meeting that starts today, it could potentially make Powell slightly less hawkish when he speaks tomorrow.

Yesterday’s 1.3% decline was the third 1%+ decline for the S&P 500 this month and the 8th 1% move (up or down).  While futures are only modestly lower now, if there is another 1% move today, it would be the most 1% daily moves in the month of January since 2016 when there were 13 (tied for the third most since 1953 when the current five-trading day week began).  If there’s not a 1% move, this January will simply be tied with last year for the most since 2016.  Thankfully, the result in terms of performance won’t be the same.

Yesterday’s decline may have been disappointing for bulls but in terms of drivers of the losses, it looks like nothing more than profit-taking following some big YTD gains.  The scatter chart below compares the performance of Industry Groups YTD heading into this week (x-axis) versus Monday’s performance (y-axis).  The two biggest losers on Monday were Autos & Parts (-5.5%) and Semiconductors (-3.0%), and heading into the week they were the two best performers on a YTD basis with gains of 36.1% and 17.2% respectively.  At the other end of the spectrum, two of the only three groups that finished the day higher on Monday (Household & Personal Products and Food Beverage & Tobacco) were also the two worst-performing groups on a YTD basis heading into yesterday.

On the topic of semis, the group is currently tightly wedged between two key levels.  About 3% below Monday’s close is the downtrend line that was broken to the upside earlier this month while about 5% above, resistance corresponding to the lows in March and the subsequent highs from June and August.

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