There's an adage coined by Yale Hirsch, the founder of the Stock Trader's Almanac: "As goes January, so goes this year."
That's got to sound promising to investors. The S&P 500 is up almost 5% in the first month of the year after a miserable performance in 2022. The technology-heavy Nasdaq has gained almost 9%.
Leading the comeback are some of the worst hit by the market slump last year. Tech giant Salesforce is up 24.2% since Jan. 1, the best month since August 2020, helped higher by a big round of job cuts and the arrival of a slew of activist investors.
Other winners this month include Micron Technology, up 24.3%, and chemicals company Dow Inc., which has gained 17.1%. Both are the best monthly gains since 2020.
The S&P 500 appears to have hit a bottom in mid-October. Perhaps not coincidentally, the International Monetary Fund has upgraded its forecasts from that month. Whereas a world recession was seen as a risk just a few months ago, now it appears unlikely.
But there are still plenty of potential roadblocks that could stop the comeback in its tracks. Despite lots of anecdotal evidence of job cuts, overall the labor market still looks strong. If that keeps inflation sticky over the next few months, the Federal Reserve will have to keep rates higher for longer. That's the main question for Chairman Jerome Powell at Wednesday's press conference.
Other factors could also keep prices rising faster. Energy prices could spike back up. China's reopening after years of Covid-19 lockdowns could be bumpy, possibly disrupting supply chains again.
But for now, fingers crossed that as January goes, so goes the rest of the year.
-- Brian Swint
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IMF Raises Global Forecast and Says Recession Unlikely
The outlook for the global economy has brightened over the past few months as inflation has slowed, the International Monetary Fund said.
-- The IMF upgraded its forecast for world growth to 2.9% from a previous
prediction of 2.7% in October. It sees the expansion accelerating to 3.1%
in 2024. In 2022, it estimates the world economy grew 3.4%.
-- Since the last forecasts, prospects have been lifted by a resilient third
quarter, still-tight labor markets, and strong spending by households and
businesses, the IMF said. Price gains are slowing after energy prices
retreated in the second half, and after the most aggressive campaign of
interest-rate hikes in a generation.
-- It predicts the U.S. economy will grow 1.4% this year, down from 2% in
2022. The euro-area rate will drop to 0.7% from 3.5%, while it sees the
U.K. as the only major advanced economy that will contract in 2023.
What's Next: A global recession is unlikely, said IMF Chief Economist Pierre-Olivier Gourinchas. That's a different tone from the outlook given in October, though resurging inflation and an escalation in Russia's war in Ukraine remain risks.
-- Brian Swint
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Ford Cuts Prices for Mustang EV After Tesla Reductions
Ford Motor Company cut prices for its Mustang Mach-E electric vehicle (EV) weeks after Tesla reduced tickets on some of its own models. Ford said the price cuts are to stay competitive as the supply chain for its electric vehicles comes online, seizing on streamlined costs, The Wall Street Journal reported.
-- Ford cut the price of the crossover Mustang to between $46,000 and
$64,000, which helps buyers qualify for the $7,500 purchase tax credit
that went into effect this year as part of the Inflation Reduction Act.
-- Tesla's price cuts prompted a surge in ordering, and Ford is increasing
Mach-E production "significantly" to shorten customer wait times. Of new
U.S. car sales in 2022, total EV sales were a little less than 6%,
implying ample room for both Tesla and Ford to sell more.
-- General Motors hired Tesla's former head of business development, Zach
Kirkman, to lead mergers and acquisitions for it. GM is deepening its
investments in the battery supply chain and is looking to build its
presence in other components of EVs by making deals with companies.
-- Chinese EV and battery maker BYD, the second-most profitable EV company
after Tesla, told investors it expects to make about $2.4 billion to $2.5
billion in 2022. BYD makes more EV models at lower prices than Tesla, but
Tesla is larger and far more profitable.
What's Next: Berenberg analyst Adrian Yanoshik upgraded shares of Tesla to Buy from Hold and downgraded shares of General Motors to Hold from Buy. With affordability and demand concerns adding to supply-chain risks, he thinks softer demand in 2023 is "increasingly likely."
-- Al Root and Janet H. Cho
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Chip Makers Under Scrutiny Amid Demand Struggles, Rising Inventory
Memory-chip prices, already down sharply, are expected to keep falling in the first half of 2023, further pressuring an industry that has cut spending and jobs, The Wall Street Journal reported. Wall Street has grown nervous about the semiconductor industry after Intel reported demand struggles and swelling inventories.
-- NXP Semiconductors forecast first-quarter earnings of $2.82 to $3.22 a
share on revenue of $2.9 billion to $3.1 billion. Analysts surveyed
expected $3.14 a share on revenue of $3.17 billion, according to FactSet.
-- NXP derives more than 50% of its revenue from supplying chips to the auto
industry. Fourth-quarter revenue rose to $3.31 billion as sales of auto
chips rose 17% to $1.81 billion from a year ago, this met expectations.
-- Advanced Micro Devices reports earnings today after the closing bell.
Wall Street expects revenue of $5.51 billion with adjusted earnings per
share of 67 cents for the December quarter. The estimate for the current
quarter's revenue is $5.5 billion and earnings per share of 68 cents.
-- Weak PC demand could affect AMD as it did Intel. But the big question for
investors is whether AMD's strength in server processors and cloud
computing can make up for some of that softness.
What's Next: Micron Technology, SK Hynix, Western Digital, and Kioxia Holdings have revealed plans to cut their spending on capacity expansion or to lower their output to address a worsening supply glut, the Journal reported. But Samsung bucked the trend Tuesday despite reporting its weakest quarterly profit in eight years.
-- Liz Moyer and Tae Kim
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Johnson & Johnson's Move to Push Talc Lawsuits Into Bankruptcy Court Rejected
Johnson & Johnson shares fell 3.7% on Monday after a panel of federal appeals judges rejected its effort to push lawsuits over its talc-based baby powder products into bankruptcy court. Johnson & Johnson has vowed to challenge the court's decision.
-- "Our objective has always been to equitably resolve claims related to the
Company's cosmetic talc litigation," Johnson & Johnson said. "As we have
said from the beginning of this process, resolving this matter as quickly
and efficiently as possible is in the best interests of claimants and all
stakeholders."
-- The possibility that Johnson & Johnson's liabilities from the more than
40,000 lawsuits claiming that its talc products caused cancer could be
enormous. The company was ordered to pay $2.1 billion to 22 individuals
in Missouri in one case. The Supreme Court declined to hear J&J's appeal.
-- Monday's opinion by the Court of Appeals for the Third Circuit upends
J&J's controversial legal strategy in late 2021 to restructure its
consumer products division into two entities: One to hold its product
portfolio, and the other to hold liabilities related to its baby powder
products.
-- That second entity declared bankruptcy, freezing all talc litigation
against J&J. A committee representing thousands of people who say they
were injured by the products said the latest court ruling "prevents
wealthy and solvent corporations from employing corporate machinations to
evade that justice," The Wall Street Journal reported.
What's Next: The future of J&J's talc strategy and new publicly traded company, Kenvue, remains unclear. Cantor Fitzgerald analyst Louise Chen wrote Monday that investors are asking, among other things, whether the development could impact or delay plans for the Kenvue spin out.
-- Josh Nathan-Kazis and Janet H. Cho
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'Super Bowl Foods' Are Less Expensive This Year, Says Wells Fargo
Even if their favorite team fell short, Super Bowl fans have a reason to cheer ahead of the big game on Feb. 12. Although food prices have risen 10.4% over the past year, prices for watch party favorites chicken wings and avocados have dropped by double digits, according to Wells Fargo's annual survey.
-- The nation's chicken supply is at its highest level since early 2019, and
chicken wing prices are down by 22% from last year's Super Bowl, Wells
Fargo said. Retail prices for whole chicken wings dropped from $3.38 a
pound last year to $2.62 a pound last week.
-- Sirloin steak prices are down almost $1 a pound since December 2021,
according to Wells Fargo Chief Agricultural Economist Michael Swanson.
Shrimp and bacon are also less expensive, and the price of hamburgers is
down from its Fourth of July high.
-- Avocado prices are down 20% because of a larger crop and better
management. But beer prices are 11% higher, wine is up 3%, spirits are up
(MORE TO FOLLOW) Dow Jones Newswires
January 31, 2023 06:19 ET (11:19 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
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