Nasdaq Markets Outlook

A mostly graphical daily curated roundup of the markets and the economy from Nasdaq's IR team.

"Well, that was some week we just had...2yr US yields +16.1bps on Friday (largest since March), a March Fed cut pricing fell to 22% (from 50% a week earlier), Magnificent Seven +5.45% on Friday alone with Meta adding the most amount of daily market cap ever ($197bn), this sent the S&P 500 to a fresh all-time high even though 73% of the Russell 2000 fell on Friday, while the US Regional Bank index fell -7.23% on the week. That is enough to wear anyone out."

-Deutsche Bank, Jim Reid

* source: Factset, produced by Gavin Zaentz

Last week: Large Caps (in particular Growth) > Small Caps

* source: Piper Sandler

YTD:

Large Caps (Growth + Blend/Core) > Small Caps (Growth +Blend/Core)

* source: JPM AM

* source: John Stoltzfus, Oppenheimer Asset Management

| Fed speak this week | Yields higher: Powell’s 60-Minutes interview last night where he signaled that a March cut is unlikely and that the Fed expects to cut 75-bps this year | Powell insists Fed will move carefully on rate cuts -CNBC

* source: CNBC

| Market Internals | "Good start, bad breadth: S&P 500 rose 1.7% in January, but only 34% of stocks outperformed the index, a bottom 3rd percentile in history."

-BofA's Savita

* source: Goldman Sachs Global Investment Research

* source: BofA

credit spreads falling, investors paying a premium for riskier bonds...

* source: Grindstone Intelligence

| "Six of the ‘Magnificent 7’ tech stocks have reported 4Q results and all but TSLA exceeded consensus sales estimates.

The ‘Mag 7’ outperformance has persisted YTD with the group returning 8% YTD compared with 3% for the S&P 493.

Investors often ask us whether the group’s 30x P/E multiple is sustainable given rest of the index trades at 18x. The premium valuation reflects investor expectations the ‘Mag 7’ will post 3-year CAGR sales growth of 12% vs. 3% for the S&P 493.

As the Dot Com boom showed, continued outperformance requires stocks to exceed the high bar set by consensus. Although growth expectations are high, if estimates are realized and valuation remains unchanged, the group will outperform."

-Goldman Sachs, David Kostin

* source: Goldman Sachs Global Investment Research

| Food for thought: how far can passive vs active go? Japan vs US...

* source: BofA

1) KEY TAKEAWAYS

1) Equities Oil + Gold LOWER / Dollar + TYields HIGHER

-"A relatively light calendar of economic data and earnings results this week will likely focus investors on earnings reports, company guidance, and comments from Fed officials in events around the country this week." -John Stoltzfus, Oppenheimer Asset Management

| China regulator vows to stabilise market after stocks hit 5-year lows -RTRS

DJ -0.5% S&P500 -0.2% Nasdaq -0.2% R2K -1.5% Cdn TSX -0.9%

Stoxx Europe 600 +0.0% APAC stocks MIXED, 10YR TYield = 4.116%

Dollar HIGHER, Gold $2,023, WTI -1%, $72; Brent -1%, $77, Bitcoin $43,114

2) Earnings: "Q4 earnings not great but good enough Q4 results look unimpressive but have largely come inline with much lowered expectations. Although EPS revisions are negative, positive share price reaction suggests investors are buying into earnings clearing events, while guidance generally reassured." -Barclays' Emmanuel Cau

"Markets are set for another busy week of earnings. The percentage of stocks within the S&P 500 that are beating estimates is running slightly above the long-term average of 72%." -Piper Sandler

with multiples up so much in ’23,

lot of pressure on equities to see the earnings follow through.

* source: Piper Sandler

3) Food for thought...

* source: BofA

4) Both measures of consumer confidence/ sentiment moved sharply higher in January.

"Strong labor and stock markets, along with falling inflation (& expectations), are lifting consumer confidence" -Piper Sandler

* source: John Stoltzfus, Oppenheimer Asset Management

* source: Oxford Economics

5) US10YR flirting with psychological 4% level...

* source: John Stoltzfus, Oppenheimer Asset Management

6) Wave of buybacks could boost stocks -RTRS

corporate buybacks should provide support in several weeks...

"Buybacks are a function of EPS growth and if earnings improves as expected, it augurs well for equity repurchases this year."

* source: Barclays' Emmanuel Cau

7) "there are pockets of weakness under the hood of the jobs report. Average hourly earnings leaped by a stronger than expected 0.6 percent, but employers cut worker hours so weekly paychecks were unchanged; nonmanagement workers suffered an outright decline in January. Businesses are reluctant to lay off workers, fearing rehiring problems down the road, but unemployed workers are finding it harder to regain a job; the share of workers out of work for more than half a year climbed to the highest level since June 2022 in January. That’s consistent with the climb in workers receiving continuing unemployment benefits over the last four months."

* source: Oxford Economics

8) THIS WEEK - quieter week ahead:

US: ISM Services | SLOOS - loan officer survey

Europe: retail sales

China: inflation data

Earnings: Disney, Eli Lilly, and Alibaba

* source: Barclays' Emmanuel Cau

2) ESG, COMPILED BY NATHAN GREENE

UK banks may be holding too little capital for climate risks, investors tell BoE - Reuters

-The group, which includes leading UK and European pension schemes including Denmark's AP Pension and PKA and other institutional investors including Sarasin & Partners and Jupiter Asset Management flagged a range of concerns to the Bank of England.

-The investors want the BoE to require that banks to disclose more and better information about the impact of climate change.

Orsted Faces Investor Pressure to Cut Dividend After Share Slump - BNN

-Wind-energy titan Orsted will pitch its strategic plan to investors this week, after a disastrous 2023 that saw a multi-billion-dollar writedown on US projects.

-The firm will seek to make the case that supply-chain issues and soaring costs are now contained.

3) MARKETS, MACRO, CORPORATE NEWS

• Fed expects to make three rate cuts this year, says Jay Powell-FT
• Falling US inflation opens door to rate cuts within months, says OECD-FT
• German exports disappoint in December on weak global demand-RTRS
• Euro zone economy showing some signs of recovery -PMI-RTRS
• Euro zone investor morale rises in February – survey-RTRS
• UK services activity rises at fastest pace in eight months-CITYAM
• UK says job market was tighter than expected in late 2023-BBG
• China margin debt gets unwound as stock selloff deepens-BBG
• China's Jan services activity expands at slower pace - Caixin PMI-RTRS
• China's tumbling prices push some exporters to the brink-RTRS
• Global hedge funds remain short, ready for further US banking turmoil-RTRS
• US Senate unveils $118 billion bill border security, aid for Ukraine, Israel-RTRS
• Trump praises Xi, while raising prospect of higher tariffs Chinese imports-POL
• US intends further strikes against Iran-backed groups, White House says-RTRS

• Novo Nordisk ‘surprised’ by high European demand for weight-loss drugs-FT
• New quality glitch to delay some Boeing 737 MAX deliveries-RTRS
• Abbott Labs must face lawsuit over PediaSure height claims-RTRS
• Musk took drugs with some Tesla Board members, WSJ says-BBG
• Grocery stores should cut prices as costs ease, Biden White House says-RTRS
• Vale’s board advised to consider outside candidates in search next CEO-BBG
• Private equity group EQT revives plans for $20bn Galderma IPO-FT
• Rubrik plans April listing amid U.S. probe into former employee-RTRS
• Boeing finds more problems with 737 max, risking delivery delays-NYT
• Amgen’s weight-loss drug shows lasting results in early study-BBG
• Microsoft in deal with Semafor to create news stories with aid of AI chatbot-FT

Oil/Energy Headlines: 1) Powell insists the Fed will move carefully on rate cuts, with probably fewer than the market expects-CNBC 2) Exxon, Chevron ramp up Permian oil growth in threat to OPEC-BBG 3) Kuwait's Al-Zour refinery hits full capacity for first time-PLATTS 4) Biden officials headed to Guyana amid dispute over oil wealth-BBG