SPX Vulnerability
February 7, 2020
Earnings: As of this morning, roughly 63% of S&P 500 companies have reported Q4 results. The blended earnings growth rate now stands at +0.7%, up from -2.0% at the beginning of the reporting season.
Jobs: Total payrolls increased +225,000 in January vs consensus for +165,000. The unemployment rate ticked up to 3.6% from 3.5% (also consensus) but for pro-growth reasons as the participation rate increased to 63.4% vs. consensus for 63.2%. And wages were mostly inline, up +0.2% month-over-month (consensus for +0.3%) and +3.1% year-over-year (consensus for +3%). Net/net, this is a strong report but highly unlikely to influence Fed policy and unlikely to impact equities by extension.
SPX: Our note from January 17 (the S&P 500 made a record high later that day) and January 23 suggested the increased probability for a 2-4% pullback in the SPX based on decelerating price trends and elevated bullish sentiment. The SPX declined ~3.2% (fits neatly into the forecasted range) on coronavirus concerns and now recovered to record highs.
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