Earnings Parade and the Federal Reserve

January 30, 2023

A Decent New Year so Far:

Last week the S&P500 index rose 2.5% ending Friday at 4070.56, putting the index up about +6% year to date. 2022 sector laggards, consumer discretionary and technology led the weekly gains up 6.4% and 4.1% each. Communication services rose 3.3%; real estate rose 2.8%; and financial stocks also rose over 2.5% on the week.

The worst groups, healthcare and utilities were amongst the best in 2022. The index has risen in three of the four weeks in 2023. The S&P500 still sits over -15% below its closing all-time highs.

Earnings season continues to ramp up. Tesla (TSLA) shares soared 33% on the week post EPS. The EV manufacturer beat reduced Q4 results and said it plans to ramp up production “as quickly as possible.”

On the downside, healthcare stocks lagged as the new year has brought reduced procedure expectations in China and Europe. Intuitive Surgical (ISRG) reported adjusted Q4 earnings per share below analysts’ expectations while revenue matched the Street view. Even so, the robotic surgery company fell 3.7% on slower China sales.

 

 

The 12-week rate-of-change of analyst EPS revisions shows that negative EPS estimate revisions are becoming less severe.

With the markets rally, the PE ratio on the S&P 500 rose to 18x last week after the weekly 2.5% rally, up from the 17.5x last week, and the 15.5x from 9/30/22.

Hence, with the mega-caps like Apple (AAPL), Alphabet (GOOG, GOOGL), and Amazon (AMZN) reporting this coming week, and with Apple not only having the S&P 500’s largest market-cap weight at 6.3% but an earnings weight that’s likely bigger than its market-cap weight, these earnings matter to the S&P 500 EPS revisions.

This week’s earnings include Exxon Mobil (XOM), Pfizer (PFE), McDonald’s (MCD), Caterpillar (CAT), Meta Platforms (META), Apple (AAPL), Google (GOOG), Amazon (AMZN), Eli Lilly (LLY) and Merck (MRK). Apple, Amazon, and Alphabet all report after Thursday’s market close on Thursday, February 2nd, 2023. Combined they account for over 10% of the S&P500 market cap.

The Federal Reserve is expected to raise rates by 25 bps on Wednesday due to still elevated inflation and tight labor markets. This will mark a slower pace of tightening due to lower inflation and a weaker economy. Powell’s press conference should leave at least one more

rate increase in March. Powell is still worried about sticky services inflation amid strong wage growth.

 

The OHFG YouTube channel is currently undergoing some placement modifications. For now, “Stock Talk” can be found by clicking on this link and subscribing to its own content.

 

https://www.youtube.com/@OakHarvestStockTalk

 

Alternatively, you can type “Stock Talk with Chris” in the YouTube search box, and you should be directed to the new content. The investment content will be a “sub-channel” under our current OHFG channel. Please subscribe if you are interested.

 

Disclosure

This content contains general information and expresses the views of Oak Harvest Investment Services. All data, articles, and information cited are believed to be reliable at the time of creation; however, Oak Harvest does not warrant any information contained herein to be correct, complete, accurate, or timely.

Oak Harvest provides links to content produced by other websites that OHFG does not control, and Oak Harvest does not necessarily approve or endorse such content and does not guarantee its accuracy. Nothing in this content constitutes personalized investment advice. Any charts, indicators, or graphs included or referenced in this content have limitations, and no such material is able, in and of itself, to provide a buy or sell recommendation for any security. Strategies and ideas discussed may not be right for you, and views and opinions expressed may change without notice. The strategies and ideas discussed will not apply to all client accounts or portfolios.

Nothing in this content constitutes a recommendation, or an offer, or a solicitation to buy or sell securities. Oak Harvest makes no assurance as to the accuracy of any forecast or projection made. Not all past forecasts or projections have been accurate. No current or future forecasts and projections are guaranteed to be accurate.  And future forecasts may not be as accurate as any forecasts discussed. Indexes like the S&P 500 are not available for direct investment and your results will differ. Past performance is not indicative of future results. Investing involves the risk of loss.