Stocks and bonds declined Monday in a broad slump. Investors took profits ahead of a week of micro and macro developments—earnings reports, a Federal Reserve decision, and key economic data.
The Dow Jones Industrial Average broke a six-day winning streak with a loss of 0.8%, as the S&P 500 fell 1.3% and the Nasdaq Composite dropped 2%. Bond yields, which move inversely to prices, rose across the curve. For the year the NASDAQ is up almost 9%, the S&P 500 5%, and the Dow 2%. And bond yields have declined year-to-date as their prices have risen.
More than a third of the S&P 500 has reported fourth-quarter results this month, with earnings for the index so far coming in 3% lower than in the same period a year ago. Excluding the energy sector the S&P 500 earnings are down 7% year over year.
The Federal Open Market Committee will issue its first monetary policy decision of 2023 on Wednesday afternoon. The FOMC is widely expected to raise the federal funds rate by a quarter of a percentage point, to a target range of 4.50% to 4.75%. Attention will turn quickly to the Fed's next move, given two key labor-market indicators out this week. On Wednesday, the December job openings and labor turnover survey, or JOLTS, will provide a glimpse at the supply side of the U.S. job market. Things are expected to have softened slightly from November.
The Jobs report will be released Friday. Economists are forecasting an increase of 190,000 nonfarm payrolls in January, following December's 223,000 rise.
The Dow Jones Industrial Average, the S&P 500, NASDAQ Comp, NASDAQ 100, and Russell 2000 while continuing their strategic trends ran into respective prior highs today and bounced back. Weekly Market Breadth indicators: NASDAQ Composite market – Bull Alert; NYSE market- Bullish
Bullish - Materials, Energy, Financials, Industrials, Communication Services, and Gold Miners. Bull alert: Technology, Real Estate, Consumer Discretionary; Bear alert: Staples, Utilities, Health Care; Bearish: none
The 10-year US Treasury Yield closed today at 3.551%, up slightly from last week's 3.525%; its long-term uptrend is making a topping pattern. The 2-year US Treasury Yield closed today at 4.25% up slightly from last week's 4.21%. The long-term uptrend is beginning a topping pattern. The 10-2 year Yield Curve remains inverted, the closing spread widened slightly to -0.70.
The Australian Dollar, the Euro, the British Pound, and the Yen all continue their respective Bullish trends vs. the US Dollar. The US Dollar Index continues Bearish, but rebounded a bit, closing at 102.09 up from last week's 101.92.
Gold's trend continues Bullish, and is overbought; Base Metals and Copper continue Bullish; West Texas Light Crude turned Bull alert.