S&P 500 (SPY) Report – 01/31/24

Good morning, traders!

The S&P 500 ($SPY) is trading below yesterday’s close. Let’s get into it… 

U.S. stock futures experienced mixed movements this morning, influenced by tech company performances and anticipation of the Federal Reserve’s interest rate decision. Nasdaq-100 futures fell by 0.9%, impacted by disappointing ad revenue from Alphabet, despite the company beating overall earnings expectations. Microsoft also saw a modest decline after their earnings report. This trend reflects a short-term reaction, as investors might be selling to secure profits despite good results.

Tech companies, having driven the market rally through 2023 and into 2024, now face high valuation pressures. The tech sector trades at nearly 29 times its 2024 earnings, which implies that these companies need to show earnings growth to justify their high price-to-book levels. Investors are shifting focus from just high valuations to demanding actual earnings improvements.

The Federal Reserve’s interest rate decision was a key focus for investors. The market largely expected the Fed to maintain rates at current levels, but there was interest in any indications of future rate cuts. The general expectation was that the Fed would adopt a cautious approach to rate cutting, aiming to avoid past mistakes of being too aggressive with rate reductions.

Other significant news affecting the stock market includes the mixed performance of the S&P 500 and the Dow Jones Industrial Average, and the anticipation of earnings reports from other tech giants like Apple, Amazon, and Meta. Additionally, the ADP employment report showed a lower-than-expected increase in private jobs for January, suggesting a slowing in wage growth for job switchers, an important factor in the post-lockdown job market.

Wednesday Economic Events:
MBA Mortgage Applications 7:00am ET
ADP Employment Report 8:15am ET – High Volatility Expected
Employment Cost Index 8:30am ET
Treasury Refunding 8:30am ET
Chicago PMI 9:45am ET – High Volatility Expected
EIA Petroleum Report 10:30am ET – High Volatility Expected
Farm Prices 3:00pm ET

Fed Speaker Scheduled:
FOMC Announcement 2:00pm ET – High Volatility Expected
Fed Chair Press Conference 2:30pm ET – High Volatility Expected

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