Equites fell and bonds rose after a surprise decline in a business outlook reading and some softening in the labor market. The market also continued to digest several earning announcements and statements from several Fed officials.
Commenting about the labor market, unemployment benefit claims jumped to the highest level since November 2021 albeit on a historical basis claims are still very low.
The narrative is beginning to rise that there is lurking danger of a still deteriorating profit backdrop, a deterioration that is not yet fully discounted. Profit expectations are very low and such a low bar historically sets the market up for success on any positive surprises.
At this juncture it is believed the first quarter will mark the trough in this earnings cycle, but this view is perhaps being challenged.
The S & P 500 is already set for an earnings recession with negative EPS growth in 4Q22, 1Q23 and 2Q23. First quarter analyst estimates have stabilized but projections for the rest of 2023 largely keep falling. The 3Q estimate of 0.2% is on the brink of turning negative too, from 4.6% anticipated growth at the start of the year.
The combination of the long-held belief [hope] that the Fed will pivot by summer amplified by the hopes of rising earnings by the 3Q is a reason for the current bullishness albeit such bullishness is only reflected in a handful of mega sized companies.
What will happen today?
Last night the foreign markets were down. London was up 0.08%, Paris down 0.10% and Frankfurt down 0.30%. China was down 1.95%, Japan down 0.33% and Hang Seng down 1.57%.
Futures are mixed. The 10-year is off 2/32 to yield 3.55%.
