February 1, 2023

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Wall Street ignored the bad news

Christopher Colany2023-01-24 22:05Senior Analyst at Bankier.pl

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2023-01-24 22:05

Despite some very bad news pouring in, Tuesday’s session on the New York Stock Exchanges did not bring any significant changes in the major indices. Thanks to this, the S&P 500 has remained above last year’s downtrend line.

Photos by Michael Nagel / / Xinhua News Agency

Wednesday’s session began with technical issues that halted trading on more than 80 securities and manifested itself in wild changes in quotations. After that, everything went surprisingly smoothly. Finally, the Dow Jones rose by 0.31% and ended the session at 33,733.96 points.

The S&P500 lost just 0.07%, recording 4,016.95 points. means hold on Above the downward line broken the previous day, but it is still easy to negate this positive technical signal. The Nasdaq fell just 0.27% after rising more than 4.7% in the previous two sessions.

Ironically, such a session can be seen as a manifestation of the strength of the stock market bulls. This is because the information reaching the investors was not the best. First of all, the fourth-quarter results disappointed 3M, which also announced 2,500 job cuts (2.6% of the workforce) and gave a very poor sales forecast for the current quarter. 3M shares were discounted by more than 6%.

The problem is, this is no ordinary company. It is an industrial conglomerate that produces thousands of products necessary for the daily life of a person in a developed country. Hence, 3M is sometimes called the American Economy for short. In addition, another US industry icon, such as General Electric, was also disappointed with its financial outlook. But General Electric shares rose 1.2%.

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Total reports from the United States published on Wednesday were also recessive. The US Manufacturing PMI for January rose unexpectedly (from 46.2 points to 46.8 points vs. 46 points expected), but still indicated a rapid decline in economic activity. Just as bad – though clearly better than economists expected – was in the services sector. There, the PMI rose by 44.7 points. in December to 46.6 points. in january. Market consensus assumed improvement to only 45 points. So optimists can say that Even the PMI is starting to suggest a ‘soft landing’ scenario for the economy After inflationary excesses in the past two years.

That’s it More US companies announce mass layoffsand on the whole Job cuts have already run into the tens of thousands. Another giant has just joined Alphabet, Amazon, Meta and Microsoft – Spotify. At Google – a measure of the economic situation in the Internet industry – 12,000 people will lose their jobs. It is difficult to expect that such moves will not have an impact on the US unemployment rate and on the consumption appetite of Americans (whether employed or already laid off).

But for now, Wall Street’s attention is focused on the fourth-quarter earnings season, which is in full swing. And this is bad, but not hopeless, as it was feared ten weeks ago or so. So far, 72 S&P500 companies have submitted reports for the fourth quarter, 65% of which beat analyst expectations. They, in turn, estimate that the company’s earnings attributable to the S&P500 (or EPS) were 2.9% lower than a year earlier. So they were weak, but without some of the tragedies and the classic “outcome recession,” which sends EPS down at least 20%.

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