Earlier in the week, Dow members – United Technologies and Procter & Gamble both rose more than 4.8 percent after reporting better than expected earnings. IBM, another Dow component, jumped 8.5 percent in its best session since Oct. 18, 2017. But then, later in the week, Intel stock fell the most in six months after its first forecast for 2019 sent a negative signal to investors, just soon after Texas Instruments beat earnings and sent a positive signal. The messiness in corporate earnings continued with Starbucks beating but Johnson and Johnson and Abbvie, both missing numbers. And, Bitcoin slumped to $3500.
And then, there was continued news of layoffs with Buzzfeed, Gannett and HuffPost announcing layoffs and President Trump attributing these layoffs to “Fake News and bad journalism”, before capitulating and agreeing to end the shutdown to open the government once again without securing any funding for the border wall.
Future Wealth’s View
The real news, worthy of watching, is going to be from the Fed next week. Given the turmoil in Washington and Wall Street, it is likely that Fed will pause on the rate increase till June at the Jan 29-30 FOMC meeting. That should calm equity markets and could provide some boost to the bond markets. While inflation and the yield curve are not hot topics anymore, we could expect the Fed to comment on the effect of the shutdown on the US economy and address concerns that China is slowing and Europe remains slow with a continued push for the stimulus to stay in place. And several emerging markets are struggling as well. These concerns, if it prompts the Fed to hold off any more raises in 2019, will be the catalyst the stock markets are waiting for, to begin a rally back to levels prior to Sep 2018.
But, what the Fed will do next week is anyone’s guess. Trump could care less about the Fed has to say and may be more inclined to start a GoFundMe page for his Wall and while he is at it, build another Congressional building to deliver his State of the Union. But, given the mixed corporate results this quarter, Fed’s comments are going to be extremely important to investors and may prompt us to review our circumspect view on the outlook for the equity markets near term.