NYSE MAC Desk Weekly Recap - January 13

The rally that started last Friday following the easing of wages within the employment report and decline in ISM Services has continued this week. Most of the gains happened ahead of the highly anticipated CPI report on Thursday which seemed to be driven by a fresh bout of FOMO as the soft landing narrative began to get some more traction. The negative sentiment and light positioning dynamics that have been in place for some time also helped to fuel this move. The data was spot on with expectations and continued to suggest that the inflationary pressures are easing. The equity market reaction to CPI was muted but major indices did end yesterday's session modestly higher.

Today was the official start of earnings of earnings season. If you missed it last night make sure to check out our Q4 Earnings Preview. Following the results from a handful of companies this morning there was a bit of weakness ahead of the open with S&P futures trading off ~1%. However,  for the second consecutive day the pull back held above the previous day's low and major indices were able to end with modest gains. The S&P 500 pausing right around its 200d moving average (~3,985) a level that capped the two most recent rally attempts in August/December but we did rally into the close ending right at 4k. For the week the index was up 2.7% bringing YTD gains to 4.2%. On a side note, we did clear the second of the Stock Trader’s Almanac January Indicator Trifecta with the first five days of the year up 1.4%. The final indicator is the full month of January. Since 1950 there have been 31 instances where all three indicators were positive the index ended that calendar year higher by an average of 17.5% with only 3 negative years. 

Last week one of the themes that we highlighted was the continued underperformance of tech/growth relative to the value factor. That did start to reverse last Friday and has swung completely in the other direction this week. After declining 1% last week the NYSE FANG+ index ended this week up 8.6%. Small caps also outperformed with the Russell 2k ending the week up ~5%. Defensive sectors like consumer staples, healthcare and utilities which all outperformed last year have been underperforming. One of the other things to note from a trading perspective is that we've seen the really speculative end of the spectrum start to move sharply higher including meme stocks and crypto etc. This is not the type of behavior the Federal Reserve wants to see.

Read the rest of the Weekly Recap here