Stocks Up Again, Adding To Last Week's Record Close  Image: Bigstock Stocks closed higher yesterday, adding to last week's gains after the S&P made new all-time highs (after two long years). However, it was the small-cap Russell 2000 yesterday that led the way with an outsized 2.01% gain. Earnings season starts ramping up this week. After the close yesterday, United Airlines posted a 24.2% positive EPS surprise, and a 0.58% positive sales surprise. They were down -0.95% in the regular session before earnings, but jumped more than 6.0% in after-hours trade. Today we'll hear from 73 companies including Johnson & Johnson, Proctor & Gamble, and Verizon before the open. Then, after the close, it's Netflix, Texas Instruments, and Lockheed Martin to name a few. Earnings season is always an exciting time since stocks typically go up during earnings season. In other news, yesterday's Leading Indicators report improved with a -0.1% m/m print, beating last month's -0.5% pace, and views for -0.3%. Today we'll get the Richmond Fed Manufacturing Index, and the Money Supply. It'll be a busy week of economic reports. But the report everybody is really waiting for is Friday's Personal Consumption Expenditures (PCE) index, which is the Fed's preferred inflation gauge. While it's expected to show inflation on the decline, just the like the CPI and PPI reports did from earlier this month, it's the last important data point before next week's FOMC announcement on January 31.
Nobody is expecting the Fed to cut rates this month, but everybody will be listening for any hint as to when they might begin. Late last year, Fed Funds traders had an 80% likelihood the Fed was going to cut as early as March. But since then, it's fallen to just 42%.
So while no change in rates are expected next week, traders will be listening closely on not just when they might begin cutting, but also, how big those cuts might be. The Fed has been forecasting three 25 basis point cuts this year. But many are expecting 4-5 cuts (100-125 basis points in total). So there's plenty of difference between the Fed's current outlook and the market's. The Fed insists they will remain data driven. And that's why Friday's PCE report will be scrutinized. In the meantime, the Dow, the S&P, and the Nasdaq 100, are all in record territory. And up for the month, so far, with 1½ more weeks to go. As they say, "as goes January, so goes the year." If so, it's looking like it's going to be another great year for the market. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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