• An uptick in interest rates as a result of the stronger than expected jobs data a week ago Friday pushed stocks lower and turned the year-to-date laggards into relative winners.  Absent an exogenous event, the financial markets will most likely move in response to the release of Retail and Wholesale inflation data as measured by the Consumer and Producer Price Indexes this Tuesday and Thursday.  Earnings season has begun to wind down (see below) and the Open Market Committee of the Federal Reserve (FOMC) will not meet again until March 21-22.
  • For those of us with a bit of gray hair or perhaps none at all, we remember the line from Sargent Joe Friday from Dragnet, “just the facts ma’am.”  (Although in reality Joe Friday never really stated that line exactly.)  President Biden would have been well served to have provided the nation with “just the facts” during his State of the Union Address, especially as it pertains to job creation as well as his energy policy.  Regarding the former, it is quite respectful as he can be directly responsible for creating approximately 3,000,000 jobs.  However, as for the latter, we believe his administration has severely compromised the position of the United States as both a global leader in energy production and our national security.
  • In describing search capabilities aided by intelligence, Microsoft CEO Satya Nadella stated that he has “not seen something like this since I would say 2007-2008, when the cloud was just first coming out.  Nadella added that “I’ve never ever felt this liberated in terms of opportunity in the days ahead.”
  • Disney announces restructuring.  Just two months after taking over, Disney CEO Bob Iger announced that the company was laying off 7,000 of its 220,000 workers and restructuring into three divisions, Disney Entertainment, ESPN and Parks, Experiences and Products.  As a result, shareholder activist Nelson Peltz dropped his proxy battle with Disney.
  • Investor Sentiment Ends Record Streak. According to the American Association of Individual Investors (AAII) weekly survey, bullish sentiment among investors rose to 37.5% of respondents as compared to 25.0% bearish.  The remaining 37.5% remained neutral in their market outlook.  The percent of respondents that are bullish is at the highest level since the last week of 2021, ending a record streak of below-average bullish sentiment in the history of the survey.  Additionally, the spread between bullish and bearish sentiment (12.5) is the widest since November 2021.  Historically this survey has been a contrarian indicator in regard to the direction of the stock market.
  • Higher for longer?  The recent rise in U.S. Treasury rates occurs as, given the recent jobs report, many believe the Fed will keep interest rates higher for longer.  For us, a pause but no pivot.
  • Yield curve inversion sets record high.  This past Thursday, the yield on the ten-year U.S. Treasury was 85 basis points (1 basis point equals 1/100 percent) below that of the two-year and in doing so set a record dating back to 1981.  It is often noted that the Fed tells the investment community when it will be raising rates but the bond market tells the Fed when they will be cutting them.  At present, the robust economic data is conflicting with the yield curve.
  • Renewal Risk.  Many bond investors should ladder to avoid renewal risk if those bond percentages will be a permanent part of your portfolio composition in order to avoid shortly renewing at a much lower interest rate.
  • Upcoming Economic Reports scheduled to be released this week include – on Tuesday, a measure of inflation at the retail level as measured by the Consumer Price Index (CPI); on Wednesday, January Retail Sales, December Business Inventories, January Capacity Utilization and Industrial Production; on Thursday, the Weekly Report of Initial Claims for Unemployment Insurance, January Housing Starts and inflation at the wholesale level as measured by the Producer Price Index (PPI); and on Friday, the January Index of Leading Economic Indicators, released by The Conference Board.
  • Approximately 70% of the companies within the S&P 500 have reported earnings this quarter.  Nonetheless, some notables due to report this week include, Zoetis (ZTS), Airbnb (ABNB), Coca Cola (KO), Cisco Systems (CSCO), Analog Devices (ADI), Shopify (SHOP), Progressive Corp (PGR), Vale (VALE), Southern Co (SO), Southern Copper (SCCO), Applied Materials (AMAT), Airbus (EADSY) and Deere (DE).

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