Inside Markets

Three months of a relatively benign macro backdrop has resulted in low equity volatility and higher valuations, though narrow leadership is cause for concern.

Friday’s Jobs Report was the fourth consecutive January where non-farm payrolls doubled consensus estimates.  

As expected, Powell used some of yesterday’s press conference to push back on March rate cut expectations.

As expected, Powell used some of yesterday’s press conference to push back on March rate cut expectations.

US equities are lower after overnight earnings failed to meet a very high bar, with post-earnings downside in MSFT and GOOGL pressuring the market cap weighted SPX and Nasdaq 100 (NDX) with the two stocks accounting for 11.5% and 14.1% respectively.

The SPX is currently butting up against trendline resistance near 4925. From a technical perspective only, the SPX needs to maintain levels above ~4800 to stay intact with a break below likely coinciding with easy-to identify bearish momentum divergence.

The SPX has held up well due in large part to the outperformance of large cap Tech, which will be tested this week with earnings from five of the ‘Magnificent 7’ plus AMD.

The logic behind pricing in a March rate cut originally came from Fed officials’ repeated emphasis on the annualized 6-month run rate core PCE.

This week’s ramp in CQ4 earnings season will be a test for the momentum-driven rally.

Yesterday’s updated Summary of Economic Projections (SEP) clearly supports market expectations for a soft landing, especially when compared to the SEP from last December.