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Stocks Closed Mostly Lower On Friday, But Small-Caps And…
  Profit from the ProsBy Kevin MatrasExecutive Vice President | ||
Stocks Closed Mostly Lower On Friday, But Small-Caps And Mid-Caps Closed Higher For The WeekStocks closed mostly lower on Friday, albeit only modestly. But the small-cap Russell 2000, once again, finished in the green. And the small-caps, along with the mid-cap S&P 400, both closed higher for the week, making it 2 up weeks in a row. Those two indexes are off to a rousing start this year with the Russell up 7.89% and the S&P 400 up 6.07%. Benign inflation readings, a good enough labor report, better-than-expected earnings, and a strengthening growth outlook (GDP in Q3 was up 4.3%, with Q4 forecast at 5.3%), have given stocks a great head start in the new year.While next week’s FOMC Announcement on 1/28 has low odds of seeing a rate cut (only 4.4% probability), March is at 21.1%, April is at 34.1%, and June (when the new Fed Chair is expected to replace current Chair Jerome Powell after his term expires in May) is at 60.8%.But the markets are forward-looking, and the economic benefits of a further rate cut should start getting priced in ahead of time.In other news, last Friday’s Industrial Production report was up 0.4% m/m, in line with last month’s upwardly revised 0.4% pace (from 0.2%), and above views for 0.1%. Manufacturing Output was up 0.2% vs. last month’s upwardly revised 0.3% (from 0.0%). And the Capacity Utilization Rate rose to 76.3% vs. last month’s upwardly revised 76.1% (from 76.0%), and estimates for 76.0%.And the Housing Market Index eased to 37 vs. last month’s 39 and forecast for 40.Earnings season picks up the pace this week with another 210 companies in queue to report with Netflix, Interactive Brokers and 3M due on Tuesday; Johnson & Johnson and Charles Schwab on Wednesday; and GE Aerospace and Intel reporting on Thursday. Next week kicks into gear with 485 companies on deck, including 3 of the Magnificent 7 stocks (Microsoft, Tesla and Apple), along with other widely held names like Texas Instruments, Starbucks, IBM, ServiceNow and Caterpillar, to name a handful.Earnings season is always an exciting time since stocks typically go up during earnings season.Other things to watch this month:The deadline to pass a budget bill(s) is January 30th. Either a new budget is passed or a continuing resolution (CR) is passed to avoid a government shutdown. Pending decision on tariffs. Two ‘opinion days,’ (which is when the Supreme Court releases written decisions on argued cases), have come and gone without a verdict yet on President Trump’s authority to implement tariffs under the IEEPA (or International Emergency Economic Powers Act). No word on when the next opinion day will be. Although, it’s widely believed a decision will be made sometime in January. In the meantime, the markets are doing well. And the economy and earnings suggest more upside.See you tomorrow, Kevin MatrasExecutive Vice President, Zacks Investment Research | ||
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