Recovery.
Robert R. Fragnito
Chief Operating Officer | Financial Advisor | Portfolio Manager at MCF Capital Management, LLC
U.S. stocks rebounded on Thursday following a difficult two-day slump after the Federal Reserve rained on aspirations of a March interest rate cut.
Stocks?traded in green territory on Thursday as investors set aside their disappointment with the Fed proceeding cautiously on the pace and depth of rate cuts.?
On Wednesday, the?U.S. Federal Reserve?kept its benchmark rate unchanged at 5.25%-5.5%, and Fed Chair?Jerome Powell?said in his press conference later in the afternoon that the possibility of a rate cut in March is off the table.??
With the Fed's January meeting in the rearview mirror, investors shifted their focus to the closing bell Thursday, where tech giants?Apple,?Amazon, and?Meta Platforms?reported quarterly earnings results.?
Investors also got a healthy dose of economic data on Thursday.?Initial jobless claims?rose to a three-month high of 224,000 at the end of January.?
January's final reading of?S&P's manufacturing PMI?entered expansionary territory, showing the strongest improvement since September 2022 and coming in better than expected.?
Separately, the Institute for Supply Management's (ISM)?manufacturing activity?index also rose to 49.1% in January from 47.1% the month prior. The?prices paid?component of the survey rose more than expected to 52.9 in January from 45.2 in December.??
Productivity?rose 3.3% in the fourth quarter, accounting for an increase of 2.7% from a year ago. In addition,?unit labor costs?rose 0.5% in the same quarter and 2.3% over the past year. The rise in productivity and a modest increase in labor costs imply the?U.S. economy?could grow faster than expected.? ? ?
Construction spending?rose for the 12th month in a row, as spending on projects rose 0.9% in December to $2.1 trillion.?
In bondland,?U.S. Treasury yields?fell sharply as labor data softened, bolstering concerns over a possible policy error by the Federal Reserve. The closely followed?10-year yield?dropped over ten basis points to end the day at 3.862%.?
Oil futures?turned lower as tensions in the Middle East seemed to ease amid news of progress on a cease-fire agreement between Israel and Hamas.?WTI crude oil?dropped 2.7% and settled at $73.82 a barrel on NYMEX.??
Gold futures?settled 0.22% higher at $2,053 an ounce on COMEX, while the?U.S. dollar?fell Thursday in light of the Fed decision.
Finally, the?Bank of England?left rates unchanged on Thursday, while BoE Gov. Andrew Bailey said rates can be lowered provided evidence showing inflation is retreating.
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Looking Ahead
And we're back! Not entirely, but today's action moved in the right direction. It appears investors got over?Wednesday's tantrum, which resulted from the Fed squashing rate-cut dreams--several Wall Street firms revised their expectations on Thursday.? ?
We will touch upon big-tech earnings in tomorrow's commentary, but at first glance, earnings for?Apple, Amazon,?and?Meta Platforms?were good.
Today's?economic data?continued showing strength and is generally in line with what we've been getting. Rising?manufacturing prices?are something to watch for on the inflation front, but it may prove to be an outlier for the time being.??
One headwind that draws our attention is the unfolding events surrounding?New York Community Bancorp, whose dropping share price has put significant downward pressure on regional bank stocks.?
The bank reported on Wednesday that it had a?surprise loss, disclosing difficulties in commercial real estate. Is this an isolated event or an indication of a wider problem??
We are?positive?on markets in the long term as we continue identifying potential purchase candidates while working within our model allocations.
Stay tuned for Friday's January?non-farm payrolls?report!??
OUR FIRM
MCF Capital Management, LLC is an independent, family-run, financial advisory firm that manages investment portfolios for individuals and businesses through Quantitative Market Data Analysis.
THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT INVESTMENT ADVICE.?
???SOURCES:?LSEG Workspace, Dow Jones NewsPlus, MarketWatch, Wall Street Journal, Barron’s, FinancialJuice, Investing .com, CNBC, Reuters, Wells Fargo Investment Institute, TradingView