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Stocks Cool Their Heels Ahead of Fed, Jobs Report

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U.S. equities drifted lower on Friday as investors looked back on the first week of the Trump Administration (High Energy!) and looked toward the week ahead, featuring a Federal Reserve policy decision, the January jobs report and a continuation of the fourth-quarter earnings reporting season.

In the end, the Dow Jones Industrial Average lost a fraction, the S&P 500 lost 0.1%, the Nasdaq Composite gained 0.1% and the Russell 2000 lost 0.4%. Treasury bonds were stronger, the dollar was stronger, gold lost 0.1%. and crude oil reversed some of its recent strength by falling 1.1%. The drop in oil boosted the ProShares UltraShort Crude Oil (NYSEARCA: SCO ) recommended to Edge subscribers to a 2.4% gain.

Healthcare stocks led the way with a 0.8% gain while energy was the laggard, down 0.9%. A number of retailers were hit as well, with Target Corporation (NYSE: TGT ) losing its 200-week moving average for the first time since 2011, as Trump seemed to warm to the idea of a border tax that would increase the cost of goods sold.

Intel Corporation (NASDAQ: INTC ) gained 1.1% after reporting a fourth-quarter earnings per share beat 4% ahead of estimates thanks to results from its cloud computing group. Microsoft Corporation (NASDAQ: MSFT ) gained 2.4% after reporting a top-and-bottom line beat as analysts remain excited about the company's cloud business. Alphabet Inc (NASDAQ: GOOG , NASDAQ: GOOGL ) fell 1.4% after missing on earnings.

On the downside, JetBlue Airways Corporation (NASDAQ: JBLU ) fell 6.9% after suffering a downgrade from analysts at Argus citing valuation concerns after a rally over the last three months. Rising fuel costs and other expenses were noted as a concern.

Colgate-Palmolive Company (NYSE: CL ) fell 5.2% after reporting a 4% revenue miss on slower-than-expected organic sales growth. And Starbucks (NASDAQ: SBUX ) fell 4% after reporting a revenue miss with traffic down 2% in the United States.

On the economic front, GDP growth slowed to a 1.9% rate in the fourth quarter, down from the 3.5% rate seen in Q3 and the 2.2% growth that was expected by analysts. Personal consumption increased at a 2.5% rate, down from 3% in the previous quarter.

Looking ahead, investors have a lot to think about next week including a Federal Reserve policy announcement on Feb. 1. Fed Board Chair Janet Yellen and her cohorts have been sounding a hawkish note lately, leaning against the fiscal stimulus plans of the Trump White House as consumer price inflation rose above their 2% target last month (on fuel and housing costs).

As a reminder, the Fed has penciled in three quarter-point hikes for 2017 vs. just two quarter-point hikes since the tightening campaign started in December 2015.

After that, we've got the non-farm payroll report on Friday, Feb. 3. The unemployment rate has compressed in recent months, standing at 4.7% in January, as the job market tightens. Non-farm payrolls came in at 156,000 in January, continuing a steady if somewhat tepid pace.

Technically, investors should remain cautious as stocks continue to look dramatically overbought here and vulnerable to a profitmaking move to the downside. Sentiment is off the charts here, with the CBOE Volatility Index (INDEXCBOE: VIX ) posting its second-lowest close in 11 years. Breadth continues to narrow.

Anthony Mirhaydari is founder of theEdgeandEdge Proinvestment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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