Stocks rally as ECI softens and confidence weakens, Mixed earnings (Exxon, UPS, GM, McDonalds), a great January for Cryptos

US stocks are rallying after some standout earnings and economic data that suggests disinflation trends should remain in place for a while. ​ Wall Street is slowly growing confident that this week’s Fed rate hike might end up being the last one in this tightening cycle. ​

US Data

The quarterly employment cost index provided optimism that wage pressures are cooling. ​ The fourth quarter ECI report printed at 1.0%, a decline from the 1.2% prior and lower than the 1.1% consensus estimate. ​ Some analysts were fearful that we could have seen a reading as high as 1.5%, so this report supports the idea that disinflation trends should remain in place.

The ECI reading is one of the key statistics that Fed Chair Powell follows, so markets quickly dialed down those March rate hike bets.

Consumer confidence edged lower and expectations continued to slide. ​ The Dallas Fed regional survey also showed manufacturing activity remains depressed. ​ The economy is weakening and that is fueling Fed rate cut bets at the end of the year. ​

Earnings Blast

Exxon

Exxon delivered mixed earnings as they delivered a strong EPS beat and posted soft revenue, but failed to come anywhere close to matching Chevron’s buyback announcement.

UPS

UPS earnings were mixed but it seems investors are liking the decision to raise prices and cut costs. ​ UPS margin and CAPEX guidance were in-line with expectations and the $5 billion buyback announcement was met with open arms.

General Motors

GM delivered a textbook impressive earnings report; a robust beat with both the top and bottom lines and better-than-expected guidance that will surprise some analysts. ​ CEO Barra noted that they are ‘on track’ to reach their EV production goals, which is benefitting from improving supply chains.

McDonald’s

Despite strong beats with EPS, revenue and comp sales, the fast-food giant shares tumbled as short-term inflationary pressures remained. ​ McDonald’s is expected to open 1900 new restaurants this year and is guiding an operating margin of around 45%.

Crypto

Bitcoin is back above the $23,000 level as risk appetite tentatively returns to Wall Street. ​ Crypto fundamentals are taking a backseat here and the primary driver is what the overall appetite is for risky assets. ​ January is turning out to be a great month for the S&P 500, the best January since 2019, and even a better month for Bitcoin which is up almost 40%.

In 2023, price action across all the top cryptos has been rather constructive despite a serious lack of the typical buzz that comes with these moves. Bitcoin appears to have massive resistance at the $24,000 level, so if the rally stalls after the Fed and mega-cap tech earnings fireworks, a consolidation back towards $20,000 could happen. ​

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