Nasdaq on track for biggest January rise since 2001

<html xmlns=""><head><title>LIVE MARKETS-Nasdaq on track for biggest January rise since 2001</title></head><body>

Main U.S. indexes end higher: Nasdaq up almost 1%

Cons disc leads S&P 500 sector gainers; energy weakest group

Dollar, bitcoin rise; gold ~flat; crude off ~2%

U.S. 10-Year Treasury yield rises to ~3.52%

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U.S. stocks added to gains on Friday in a week in which economic data and corporate earnings guidance both hinted at softening demand, but also economic resiliency ahead of next week's Federal Reserve monetary policy meeting.

With this, the DJI .DJI eked out a gain for a sixth-straight session. The blue-chip average last rose six days in a row in October.

Of note, the Nasdaq Composite .IXIC ended above its 200-DMA for the first time since January 14, 2022.

For the week, the DJI gained 1.8%, while the S&P 500 .SPX rose 2.5%. The Nasdaq Composite .IXIC advanced 4.3%.

With just two trading days left in January, the SPX, which is now up 6% for the month, is on track for its biggest January rise since 2019, when it gained 7.9%. The IXIC, which is up 11% so far this month, is on pace for its biggest January rise since a 12.2% surge in 2001.

Here is a snapshot of where markets stood just shortly after Friday's closing bell:

(Terence Gabriel)



While many people went big on home improvements during the pandemic, the UBS Housing Intentions Consumer Survey has since found softening demand, even from pre-pandemic levels.

The survey of over 2,000 adults from Nov. 25-Dec. 14, showed 51% of people expected to complete a project in the next 3 months versus 69% showing interest in December 2021 and a 59% average for 2014-2019.

The average expected spend per project rose 5% year-over-year to ~$6,900. But those shopping at top vendors Home Depot HD.N expected their spend to fall 3%, while the expected decline was a more dramatic 12% for Lowe's Companies LOW.N and 13% for AMZN.O.

Home Depot was mentioned by 31%, Amazon by 22% and Lowe's by 13%. While HD's popularity rose by 200 basis points, Amazon's fell by 100 bps and Lowe's sank by 400 bps.

UBS analyst Michael Lasser said reasons for the slowdown included "a pull-forward of demand during COVID." He also cited a tight housing market, due to rising interest rates rise declining affordability and a trade-down from bigger remodeling projects to smaller maintenance & repair projects.

Re-painting interiors and repairing or replacing sinks were the most common. Spending was considerably higher for those planning to buy or sell homes.

More affluent households were cautious about high-ticket projects with those earning $200k+ suggesting significantly fewer $20,000 or more projects. However this was offset by intentions for more low-value projects.

Flooring was weak with intentions to replace or add wood, tile or stone floors falling ~300 basis points yr/yr, marking the 5th consecutive quarter of pressure on this sector.

With 84% on fixed rate mortgage, and 53% are paying <4% interest, Lasser said higher interest rates may keep more homeowners in current homes, potentially driving spending on maintenance and repairs.

Only 55% of homeowners reporting having funds for their projects, which is the second lowest level in history after Sept '22, according to the report. So nearly 30% plan to use credit, which Lasser sees adding potential risk to the category if high interest rates impact their spending.

So he cut his HD 2023 EPS view to $16.30 from $16.75 vs consensus of $16.67 and also cut his 2024 EPS view to $17.50 from $18 vs $17.89 consensus.

He cut his LOW '23 EPS view to $13.95 from $14.04 vs $13.92 consensus, and cut his 2024 EPS view to $15.05 from $15.52 vs $15.14 consensus.

Floor & Decor Holdings FND.N 2023E EPS view, he cut to $2.65 from $3.16 vs $3.03 consensus, and his 2024 EPS view to $3.40 from $3.93 vs consensus of $3.83).

But on the plus side, Lasser says near-term uncertainty is already reflected in HD and LOW valuations.

(Sinéad Carew)



Individual investor optimism over the short-term direction of the U.S. stock market fell from a nine-week high in the latest American Association of Individual Investors (AAII) Sentiment Survey. With this, pessimism rose, while neutral sentiment dipped.

AAII reported that bullish sentiment, or expectations that stock prices will rise over the next six months, dipped 2.6 percentage points to 28.4%. Bullish sentiment remains below its historical average of 37.5% for the 56th consecutive week, but is "no longer at an unusually low level for the second consecutive week."

Bearish sentiment, or expectations that stock prices will fall over the next six months, increased 3.6 percentage points to 36.7%. This is the first time since August 2022 that pessimism is below 40% for three consecutive weeks. Bearish sentiment is above its historical average of 31.0% for the 59th time out of the past 62 weeks.

Neutral sentiment, or expectations that stock prices will stay essentially unchanged over the next six months, slipped by 1.0 percentage point to 35.0%. Neutral sentiment is above its historical average of 31.5% for the fourth consecutive week. At four weeks, this is the longest streak of above-average neutral sentiment since a five-week stretch in March and April 2022.

With these changes, the bull-bear spread widened to -8.3 percentage points from -2.1 percentage points last week:

The current reading is still below the historical average of 6.6%.

AAII noted that concerns over the economy, inflation, corporate earnings and stock market volatility continue to weigh on investor sentiment.

(Terence Gabriel)



Stocks and credit markets have typically benefited in the past 30 years after the Federal Reserve stops raising rates, but this time might be different, according to Barclays Capital, which says that the current environment more closely resembles inflationary periods of the more distant past when there was greater downside for both markets.

A less-hawkish Fed is normally bullish for risk assets, while an economic downturn is bearish. But in the tug of war between the economy and a less-hawkish Fed, credit markets are more reactive to an impending economic slowdown, Barclays said.

In the past 30 years a Fed pause was neutral to positive for credit, however going back to the 1950s data show that credit spreads widen after a Fed pause, on average, and the effect is more pronounced for older time periods.

The picture is also similar for stocks. In the last six hiking cycles going back 40 years, the S&P 500 has nearly always hit a new all-time high after a Fed pause. However, “as with credit, time until recession was a determinant of performance, and we are skeptical that the eventual Fed pause will be a risk-on event.”

The last time the Fed was fighting “runaway inflation” was in the early 1980s, and at that time the window between the Fed’s last hike and a recession was “too short or even non-existent,” and led to a 20-35% equity drop after the Fed paused, Barclays said.

Barclays expects the Fed to pause in the second quarter and a U.S. recession to start in the second half of the year and “a Fed pause in today's environment would likely be a bearish signal for equities."

(Karen Brettell)



All week, market participants anxiously awaited today's data, which arrived with much fanfare and few surprises.

To summarize: demand is softening a bit, which is helping inflation to cool. It's the proverbial "Goldilocks" scenario which suggests what the Fed is doing is actually working.

The Commerce Department's feverishly anticipated Personal Consumption Expenditures (PCE) report, which covers everything from consumer income, spending and inflation, came very close to hitting the consensus bull's eye up and down the line.

The Fed's most closely watched element is, of course, the price index USPCE=ECI, which rose by 0.1% from November and 5.0% year-over-year.

Stripping out volatile food and energy prices, the so-called "core" PCE measure gained some heat on a monthly basis, rising by 0.3% from 0.2% the prior month, but shed 0.3 percentage points to 4.4% on an annual basis.

The price index furthers the narrative that the Fed's restrictive monetary policy is working as intended, that prices have begun their long descent back toward Powell & Co's average annual 2% target.

"The Fed can legitimately downshift the pace of rate hikes next week as inflation cools," writes Jeffrey Roach, hief economist at LPL Financial. "Faltering growth and decelerating inflation will likely cause the Fed to refocus on growth, the other part of its dual mandate."

Elsewhere in the report, while personal income USGPY=ECI nailed expectations by rising by 0.2%, personal outlays USGPCS=ECI decreased by 0.2%, slightly steeper than the 0.1% drop projected, and the report's singular surprise.

Taken together, those two elements resulted in the saving rate - or the portion of disposable income left unspent - rising off historic lows, gaining 0.5 percentage points to 3.4%.

"Coupled with yesterday's GDP report, I think (the PCE data) should be viewed favorably," said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. "We seem to be having a slowing economy that's still growing, which is a Goldilocks scenario from the Fed's perspective."

Separately, signed contracts for the sales of pre-owned U.S. homes USNAR=ECI unexpectely rose by 2.5% in the last month of 2022, according to the National Association of Realtors (NAR).

Street expectations called for a 0.9% drop.

It marked the index's first uptick in seven straight months, which is particularly good news since, along with mortgage demand and building permits, pending home sales is considered the among the more leading housing indicators.

The data falls in line with other recent housing market data, which together suggests the troubled sector may have found a floor.

"This recent low point in home sales activity is likely over," says Lawrence Yun, chief economist at NAR. "Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market."

Even so, it should be noted that the index remains well below pre-pandemic levels:

And finally, the University of Michigan released its final take on Consumer Sentiment for January USUMSF=ECI, which landed at 64.9, or 0.3 points brighter than its initial take.

While the "current conditions" component lost some luster, shaving off 0.2 points, "expectations" posted a 0.7 point jump.

Even so, "there are considerable downside risks to sentiment, with two-thirds of consumers expecting an economic downturn during the next year," writes Joanne Hsu, director of UMich's Surveys of Consumers.

"Consumers continued to exhibit considerable uncertainty over both long and short-term inflation expectations, indicating the tentative nature of any declines," Hsu adds.

That's certainly true. While one-year and five-year inflation expectations both edged a bit cooler to 3.9% and 2.9%, respectively, those levels are still elevated, and well above the Fed's aforementioned 2% annual target.

Wall Street wavered in morning trading as investors chewed on the data and a mixed spate of earnings.

(Stephen Culp)



Wall Street is higher early on Friday even after Intel's bleak outlook dragged chipmakers down. Meanwhile, a reading on the Federal Reserve's preferred inflation measure showed signs of price pressures easing.

The chip index .SOX is down around 0.5%. That said, it's well off its initial drop of more than 2%.

In any event, the DJI .DJI is shooting for a sixth-straight daily rise, while the Nasdaq Composite .IXIC is on track to gain for a fourth-straight week.

The IXIC (roughly 11,575) is also attempting its first close above its 200-day moving average (now 11,506) since January 14, 2022.

Here is a snapshot of where markets just after 1000 EST:

(Terence Gabriel)



2023 has not been kind so far to the maker of the first approved COVID-19 vaccine in the United States.

Waning infections have dragged sales of Pfizer's PFE.N shot down from pandemic highs and along with it, the drugmaker's share price, which fell 13% last year. This has brought into question the drugmaker's growth prospects in 2023.

Shares have fallen nearly 14%in the first month of this year, with the latest setback coming from a rating downgrade by UBS analysts on Thursday.

UBS slashed its estimates for Pfizer's COVID vaccine and therapy sales in 2023 and said Street estimates also need to come down given falling COVID cases and decreasing severity of variants.

The analysts don't see an upside from Pfizer's pipeline in the near term either.

"While PFE's pipeline has a number of shots on goal, the late stage assets (RSV, etc.) are already in street ests and it is too premature to assign value to the earlier stage assets," they said in a note.

For 2023, Cantor Fitzgerald analysts expect U.S. revenues for Pfizer's vaccine, Comirnaty, to be minimal, unless more government contracts are secured or sales move into a commercial market.

Additionally, they expect expecting minimal to no revenues in the U.S. for the company's antiviral Paxlovid in the fourth-quarter, they said in a note earlier this year.

On the other hand, Pfizer's rival and fellow market leader in the breakthrough messenger RNA (mRNA) space, Moderna Inc MRNA.O is off to a much better start this year.

Shares of the company, which quickly bagged U.S. approval for its own COVID shot after Pfizer, have risen 7.6%so far in 2023, thanks to growing interest in the potential of its extensive mRNA vaccine pipeline.

Analysts have cheered the recent success of Moderna's respiratory syncytial virus (RSV) vaccine, saying it validates the company's mRNA platform beyond its COVID franchise.

Pfizer is due to report fourth-quarter results on Tuesday of next week and Moderna is expected to report in February, where analysts and investors will get a further glimpse into the companies' plans to tackle declining COVID revenue.

(Amruta Khandekar, Bhanvi Satija)



Tesla shares rallied in the previous session after strong results and a bullish outlook by top boss Elon Musk, with retail punters deciding to chase the stock higher rather than take profits.

Retail investors set a new daily record for purchases - over $358 million - even as shares of the electric vehicle maker jumped nearly 11%, according to Vanda Research.

"If we exclude Q1 of 2020 (for obvious reasons), then we can expect retail investors to chase momentum after these upbeat results and continue buying TSLA shares at a high clip in the week ahead," researchers at Vanda Research added in a note.

Shares of Tesla are rising more than 1% in premarket trading on Friday and are set for their best weekly performance in 15 months.

Rising interest rates had sparked a sharp selloff in technology stocks last year, with Tesla posting its worst year ever in 2022.

But, the automaker has sharply rebounded this month, up 30% so far as China reopened its borders and Tesla announced price cuts to stir demand.

"Tesla investors are craving clarity and stability and this quarter has offered a dose of both," said Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown.

(Bansari Mayur Kamdar)



The Dow Jones Industrial Average .DJI ended Thursday higher for a fifth-straight session. That's its longest daily winning streak since a six-day run of gains in October of last year.

It remains to be seen if the DJI will match that streak Friday, but in the wake of the 0830 EST release of December core PCE price index data, e-mini Dow futures 1YMcv1 are suggesting the blue-chip average is poised to open roughly flat.

Meanwhile, the DJI, which ended Thursday at 33,949, has spent the last five weeks, chopping around between 32,573 and 34,712:

On the downside, the Dow is once again using the 23.6% Fibonacci retracement of its March 2020-January 2022 advance, at 32,530, and its 40-week moving average (WMA), now at 32,285, as support.

Therefore, traders may look for momentum in the event of a breakout of the 32,285-34,712 range.

In the event of an upside thrust, however, a long-term log-scale resistance line from the Dow's 1929 high, can once again present a hurdle.

This line comes in around 36,000 on a weekly basis. The Dow's January 2022 record intraday high was at 36,952.65.

Breaking the 40-WMA may see the DJI once again threaten the 38.2% Fibonacci retracement of the March 2020-January 2022 advance at 29,794.

(Terence Gabriel)




Retail punters flock to favorite Tesla

Two COVID vaccine makers, two different stories




Pending home sales

UMich inflation expectations



(Terence Gabriel is a Reuters market analyst. The views expressed are his own)


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