Markets Close at Session Lows Ahead of Massive Data, Fed
Markets started out this morning ahead of the opening bell sluggish. There did not seem much, if any, appetite to drive the rally that’s sent up major indices in four or five of the past seven sessions (depending on the index), and we see these indices closing at session lows today. The Dow dropped -260 points, -0.77%, and it was the outperformer. The S&P 500 was -1.30% on the day, while the Nasdaq sank -227 points, -1.96%. The Russell 2000 was -1.30%.
Clearly there is some trepidation here. With a bounty of new economic prints awaiting us, we also get the latest Fed hike mid-week. And while the 25 bps consensus raise may well come into being, it’s the tone of the messaging — especially from Fed Chair Jay Powell in the news conference following the policy release: what investors are dreading is more hawkishness, such as insistence interest rates are headed north of 5%. Currently, the market is pricing-in rates capping just beneath that.
The timing of this Fed meeting isn’t terribly convenient, either, coming in as it does smack dab in the most crowded week for market data so far this year. The Fed won’t have the advantage of seeing nonfarm payrolls released Friday morning before its decision is made, nor jobless claims, Q4 productivity, factory orders or PMI and ISM Services data.
However, because of this, we may be within bounds to take whatever extra hawkish sentiment comes from Powell Wednesday afternoon with a grain of salt — especially if soft employment numbers, etc. greet us in the latter part of the week. The Fed is ever-insistent it is data-driven, and worse economic news is still better in terms of a shorter stint of Fed rates climbing and staying higher longer. So it would stand to reason bad economic news may cause the Fed to re-think its position directly after its meeting.
NXP Semiconductor NXPI is out with Q4 earnings after today’s closing bell, with earnings missing notably — $2.76 per share versus $3.60 in the Zacks consensus — on quarterly sales of $3.31 billion, which outpaced the expected $3.28 billion. Although the company announced a dividend hike going forward, its guidance for next quarter on both earnings and revenues are lower than current consensus estimates.
Kitchen appliance giant Whirlpool WHR also reported mixed Q4 results, though in the reverse: earnings easily surpassed the Zacks consensus — $3.89 per share versus $3.44 expected — on $4.92 billion in quarterly sales, which missed the $5.05 billion analysts were looking for. Whirlpool also lowered guidance for next quarter earnings and sales, to 16-18 cents per share on $19.4 billion from $19.25 per share and $19.85 billion in the Zacks consensus, respectively.
The Case-Shiller Home Price Index and Consumer Confidence Index are the big reports due out Tuesday morning, along with earnings from Caterpillar CAT, Exxon XOM, Pfizer PFE, UPS UPS, McDonald’s MCD and AMD AMD. This should be more than enough to keep us occupied while traders decide if they’ve hedged enough against tough talk from the Fed Wednesday.
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