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“The function of socialism is to raise suffering to a higher level.” – Norman Mailer

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January often seems like the longest month of the year, but it’s hard to believe it’s already winding down. What’s been a strong month for equities so far looks to be going out on a sour note as earnings from mega-caps like Alphabet (GOOGL), Microsoft (MSFT), and Tesla (TSLA) haven’t impressed investors. Based on today’s pre-market levels, all three stocks have traded down in reaction to their earnings reports. That leaves Apple (AAPL), Amazon.com (AMZN), and Meta (META) on Thursday as the last chances to salvage something from the mega-cap space this earnings season (NVIDIA doesn’t report until late February).

On the economic calendar today, the ADP Employment report for January missed forecasts coming in at a level of 107K compared to forecasts for an increase of 150K. The Employment Cost Index was also just released and showed a smaller-than-expected increase of 0.9% compared to forecasts for growth of 1.0%. The only other report on the calendar for the day is the Chicago PMI at 9:45 which is expected to modestly increase from 46.9 to 48.0. But the most important event of the day is the FOMC’s rate decision at 2 PM, and given expectations for no change in rates, every word of Powell’s press conference thirty minutes later will be dissected down to each syllable.

As mentioned above, the first of the mega caps to report haven’t impressed investors so far this earnings season. Earnings reports are just one day in a quarter, though. While a positive stock price reaction to an earnings report can be nice, it’s only a small part of the picture.

Look at the chart of GOOGL below. With the stock trading down over 5% in the pre-market, it is now on pace to have its fifth negative earnings reaction day in the last six quarters. To put that in perspective, if you had purchased the stock at the close on the day of its earnings report and only held it through the close on its earnings reaction day, you’d be down just over 21% on these six trading days alone. Over the entire period and including these six days, though, GOOGL’s cumulative performance has been a gain of over 51%. Again, not only is a stock’s performance on its earnings reaction day a small part of a bigger picture, but it can also be wildly inaccurate.

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