Mid-Week Market Minute 1.18.23

Earnings, Economic Data Sends Mixed Signals to Investors

Stocks in the U.S. fell in early trading this week as shares investors digested a deluge of earnings and economic data. In financials, Goldman Sachs traded sharply lower on Tuesday after reporting its worst earnings miss in over a decade. On the other hand, shares of Morgan Stanley spiked on Tuesday after reporting record growth in trading and wealth management revenue. Overall, earnings from the banks have been a mixed bag. Excess deposits are falling, and consumers are financing more of what they are spending, but overall balance sheets still are relatively healthy.

Inflation data this week continued to show declining prices, as the producer price index (PPI) declined 0.5% for the month of December against expectations for a more modest decline of 0.1%. Energy prices dropped 7.9% for the month, (gas prices down 13.4%), which helped the favorable headline reading. Meanwhile, retail sales fell 1.1% in December, more than the 0.8% expected decline. These numbers send mixed signals to the markets as a slowdown in inflation is welcome news, yet the decline in retail sates raises worries of an economic contraction. In the central bank space, multiple Federal Reserve officials are slated to speak throughout the week and the central bank will release its Beige Book on Wednesday afternoon. Markets now are pricing in more than a 90% chance of a 25bp hike at the next Fed meeting concluding on Feb. 1, with the terminal, or peak funds, rate now projected to be in the 4.75%-5.00% range by the end of spring of this year.

Source: GSAM, CNBC, JPMorgan

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