Investors
are
heading
into
next
week
on
edge
as
stocks
struggle
to
start
the
year,
with
key
inflation
data
and
big
bank
earnings
on
deck.
The
major
averages
kicked
off
2024
with
a
whimper.
The
S
&
P
500
on
Friday
snapped
its
best
weekly
winning
streak
going
back
to
2004.
The
Nasdaq
and
Dow
Jones
Industrial
Average
registered
their
first
weekly
loss
in
10
weeks.
Market
choppiness
is
typical
at
the
start
of
a
new
year.
But
a
couple
of
Apple
downgrades
have
investors
concerned
stocks
are
overbought
after
their
recent
rally,
while
a
strong
jobs
report
on
Friday
muddied
the
outlook
for
interest
rates.
Apple
shares
slumped
roughly
6%
this
week.
The
10-year
Treasury
yield
topped
4%.
AAPL
YTD
mountain
Apple
Wall
Street
will
have
further
hurdles
to
clear
next
week.
A
hot
consumer
inflation
reading,
after
this
week’s
better-than-expected
payrolls
number,
could
further
dampen
investor
sentiment
—
especially
as
markets
have
priced
in
more
rate
cuts
than
the
Federal
Reserve
has
indicated.
“For
now,
the
name
of
the
game
is
patience.
Rate
cuts
are
still
the
table,
but
investors
will
probably
have
to
wait
until
the
second
half
of
the
year,”
Chris
Larkin,
managing
director
at
E-Trade
from
Morgan
Stanley,
wrote
on
Friday.
“And
the
Fed
has
made
clear
it’s
prepared
to
go
the
other
direction
if
it
thinks
inflation
is
on
the
rise
again,”
he
added.
‘All
goes
back
to
inflation’
Typically
speaking,
inflation
readings
take
a
backseat
to
the
jobs
report
in
terms
of
market
significance.
That
hasn’t
been
the
case
over
the
past
year,
though,
as
investors
try
to
ascertain
how
a
data-dependent
Fed
will
proceed
as
it
works
to
bring
inflation
down
to
its
2%
target.
The
December
consumer
price
index
that’s
set
for
release
Thursday
is
expected
to
confirm
the
recent
trend
of
easing
inflation.
Economists
polled
by
FactSet
expect
headline
CPI
to
have
risen
by
0.15%
last
month,
more
than
the
0.1%
rise
in
the
month
prior.
But
core
inflation,
which
excludes
volatile
food
and
energy
prices,
is
expected
to
have
risen
0.25%,
down
from
the
0.3%
increase
in
the
prior
month.
Joe
Kalish,
chief
global
macro
strategist
at
Ned
Davis
Research,
thinks
an
inflation
reading
that
comes
in
hotter
than
expected
will
be
poorly
received
by
markets.
He
also
urged
investors
to
keep
a
careful
eye
on
oil
prices,
which
have
been
moving
higher
over
the
last
several
days
amid
conflict
in
the
Middle
East.
On
Wednesday,
oil
prices
spiked
more
than
3%.
“We
saw
inflation
expectations
coming
down
on
the
back
of
lower
oil
prices.
And
so,
if
events
start
moving
the
other
way,
that’s
also
going
to
maybe
call
into
question
this
narrative,
‘Oh,
inflation
is
coming
down,
it’s
gonna
hit
the
Fed’s
target,'”
Kalish
said.
“So
that,
again,
all
goes
back
to
inflation.”
@CL.1
YTD
mountain
West
Texas
Intermediate
Earnings
season
begins
Big
bank
earnings
will
kick
off
the
start
of
the
latest
corporate
earnings
season
at
the
backend
of
next
week,
with
Bank
of
America
,
Citigroup
,
JPMorgan
Chase
and
Wells
Fargo
all
reporting
on
Friday.
This
week,
JPMorgan
shares
hit
record
highs
after
Goldman
Sachs
called
it
a
top
2024
banking
pick.
Dow
component
UnitedHealth
reports
next
week,
along
with
Delta
Air
Lines
and
BlackRock
.
However,
Wells
Fargo’s
Christopher
Harvey
on
Friday
wrote
that
early
indications
suggest
this
earnings
season
will
be
“a
mostly
negative
catalyst.”
He
pointed
out
that
12
of
the
20
S
&
P
500
members
that
reported
fourth-quarter
earnings
thus
far
have
posted
a
negative
one-day
reaction;
all
20
stocks
averaged
a
1.3%
drop.
For
example,
Walgreens
dropped
5.1%
on
Thursday,
citing
challenges
from
consumer
pressures.
‘A
Down
January’
As
it
is,
market
observers
expect
near-term
pressures
will
continue
for
equities,
with
megacaps
lagging
as
performance
broadens
out
to
the
other
493
stocks
in
the
S
&
P
500.
In
fact,
the
lack
of
a
Santa
Claus
Rally
this
year
raises
the
risk
of
“a
down
January,”
according
to
Bank
of
America
Securities’
Stephen
Suttmeier.
First
identified
by
the
Stock
Trader
Almanac’s
founder
Yale
Hirsch,
the
Santa
Claus
Rally
refers
to
the
market’s
propensity
to
outperform
in
the
final
five
trading
days
of
one
year
and
the
first
two
trading
days
of
the
next.
Since
1929,
the
S
&
P
500
is
higher
62%
of
the
time,
and
averages
a
1.2%
gain.
“However,
when
the
SPX
does
not
experience
its
Santa
rally,
the
risk
increases
for
a
down
January
with
the
month
down
55%
of
the
time
on
an
average
return
of
-0.38%
(-1.3%
median),”
Suttmeier
wrote
on
Thursday.
“January
has
plenty
of
trading
days
left,
but
a
down
January
would
generate
a
bearish
January
Barometer
signal
for
2024.”
Still,
many
market
observers
remain
optimistic
that
stocks
will
continue
to
drift
upward
after
the
consolidation,
even
if
they
don’t
rally
to
the
same
degree
as
they
had
last
year.
These
observers
urge
investors
to
remember
that
rate
cuts
are
coming,
even
if
there
may
not
be
as
many
as
markets
are
expecting.
“Thematically,
I
think
it’s
healthy
the
market’s
broadening
out,”
said
Art
Hogan,
chief
market
strategist
at
B.
Riley
Financial.
“I
think
it’s
okay
that
people
are
trimming
positions
in
the
seven
most
loved
stocks
in
the
Nasdaq
of
last
year,
and
looking
for
opportunities
of
things
that
didn’t
perform
last
year.”
Many
market
observers
expect
that
means
traders
should
add
exposure
to
small
caps,
citing
the
valuation
gap
between
small
and
large
cap
stocks,
as
well
as
many
of
last
year’s
market
laggards.
In
fact,
Nicholas
Galluccio,
portfolio
manager
at
the
Teton
Westwood
SmallCap
Equity
Fund,
said
he
anticipates
small
caps
will
outperform
large
caps
over
the
next
three
years.
Elsewhere,
Fundstrat’s
Tom
Lee
recently
told
CNBC
he
expects
small
caps
will
surge
50%
over
the
next
12
months.
“We’ve
seen
a
major
shift,”
Galluccio
said.
“The
long
awaited
great
rotation
from
large
cap
growth
into
value
and
small
cap
arrived
with
a
vengeance
at
the
end
of
the
year.
And
that
should
continue.”
The
small
cap
Russell
2000
has
soared
13%
over
the
past
three
months.
However,
it’s
down
more
than
3%
to
start
2024.
Week
ahead
calendar
All
times
ET.
Monday
Jan.
8
3
p.m.
Consumer
Credit
(November)
Tuesday
Jan.
9
6
a.m.
NFIB
Small
Business
Index
(December)
8:30
a.m.
Trade
Balance
(November)
Wednesday
Jan.
10
10
a.m.
Wholesale
Inventories
final
(November)
3:15
p.m.
New
York
Federal
Reserve
Bank
President
and
CEO
John
Williams
gives
keynote
remarks
for
“2024
Economic
Outlook”,
New
York.
Thursday
Jan.
11
8:30
a.m.
CPI
(December)
8:30
a.m.
Hourly
Earnings
final
(December)
8:30
a.m.
Average
Workweek
final
(December)
8:30
a.m.
Initial
Claims
(week
ended
Jan.
6)
2
p.m.
Treasury
Budget
(December)
Friday
Jan.
12
8:30
a.m.
PPI
(December)
Earnings:
Citigroup
,
Wells
Fargo
,
JPMorgan
Chase
,
Bank
of
America
,
Delta
Air
Lines
,
The
Bank
of
New
York
Mellon
,
UnitedHealth
Group
,
BlackRock
