Morning Reads

Morning Reads

  • Tesla aiming to build cars at Mexico plant next year (TSLA NYT
  • UBS cutting bonus pool (UBSBloomberg
  • Caterpillar will not close more union-represented plants (CATWSJ
  • Arm looking to raise $8 bln in U.S. IPO Reuters
  • Harris Associates divests stake in Credit Suisse (CSFT
  • Positive view of Target (TGTBarron's
  • Positive view of Chubb (CBBarron's
  • Positive view of Boot Barn Holdings (BOOTBarron's
  • Positive view of Deere (DEBarron's
  • Fed Chairman Powell to testify this week (SPYBloomberg

Todays Open Interest Change




The market has had a wild first two months to the year, firing on all cylinders in January and paring some gains in February, only to resume its upward ascent last week. Investors are now sizing up their outlooks as trading begins for the first full week of March, with several upcoming catalysts that have the potential to sway market direction. On Tuesday and Wednesday, Fed Chair Jay Powell will head to Capitol Hill for his semi-annual testimony, ahead of the February Jobs Report released on Friday. Don't forget the latest Consumer Price Index that will be published next week, as well as Fed's March policy meeting (and quarterly rate projections) that will come at the end of the month.

Backdrop: One of the best gauges of market health is the benchmark S&P 500 (SP500), but perhaps an even better gauge of the internal happenings of the market are the sectors that make up the index. They adhere to the same industry taxonomy closely followed by the financial community, which was developed by Standard & Poor's and MSCI in 1999. Called the Global Industry Classification Standard, or GICS, the structure consists of 11 sectors (as well as 24 industry groups, 69 industries and 158 sub-industries) that categorizes all major public companies.

What things have shown is that many of the big trades that were hot in 2022, namely energy, consumer staples and healthcare, have been relegated to the back burner. It appears that investors are betting that the record profits seen in 2022 will be hard to replicate in terms of future growth rates, but a rebound might be in store as the year progresses. On the other hand, information technology, which makes up nearly 28% of the S&P 500, has significantly outperformed on the back of rocketing interest in artificial intelligence and massive U.S. subsidies that are pouring into the chip sector.

Outlook: The benchmark S&P 500 Index is up 5.8% so far in 2023, after falling nearly 20% in 2022 to mark its worst performance since the financial crisis. It also gives investors plenty of time to make calls on the rest of the year. Check out the 5 Stocks To Own In The S&P 500 by Steve Cress, Head of Quantitative Strategies at Seeking Alpha, as well as SA's stock screener, where users can discover new stocks based on each S&P sector.

Survey Monday

Which S&P 500 sector will walk away with the biggest gain in 2023?

· Communication Services (+11.7% YTD)
· Consumer Discretionary (+12.9% YTD)
· Consumer Staples (-3% YTD)
· Energy (-1.2% YTD)
· Financials (+4.8% YTD)
· Health Care (-5.2% YTD)
· Industrials (+5.2% YTD)
· Information Technology (+12.4% YTD)
· Materials (+8.7% YTD)
· Real Estate (+4.7% YTD)
· Utilities (+6.6% YTD)

Take the survey and see the results here

New budget, new priorities

China's National People's Congress convened its annual parliamentary gathering over the weekend, setting a GDP growth goal of "around 5%" for 2023 to mark its lowest target in over three decades. Perhaps unsurprisingly, China's defense spending will rise by 7.2% - or by nearly $230B - which is greater than its economic growth objective, and ahead of its 5.7% increase in general public expenditure. The figures will be on the radar of lawmakers on Capitol Hill, with U.S. defense spending in focus amid budget cut talks on the debt ceiling. Tensions are also continuing to escalate between the world's largest economies as the Biden administration reportedly prepares a new program that could prohibit American investment in certain sectors in China. (6 comments)

More cost cuts?

Despite a commitment by Amazon (AMZN) to expand its brick-and-mortar grocery store business, the company is shuttering nearly a third of its Go convenience stores. Speaking about the e-commerce behemoth's physical presence, Amazon just halted construction of its second headquarters in Virginia. It said it was part of broader cost-cutting efforts amid the shifting macroeconomic climate and comes after the firm laid off over 18,000 employees earlier this year. It's not all a surprise. In its last earnings call, Amazon said it would "exit certain shops with low growth potential," while recording a $720M impairment charge. (3 comments)

Trading on the Hill

As the debate over conflicts of interest within the U.S. government rages on, Senator Josh Hawley (R-MO) is expected to reintroduce a bill today that would ban federal officials from trading stocks. The measure would apply to senior members and their spouses, requiring them to divest their stocks or place them in a blind trust within six months of starting their job (the ban wouldn't apply to diversified mutual funds). Lawmakers in both parties have pushed for restrictions on stock trading by federal officials, especially after the discovery of well-timed trades at the start of the pandemic. While Congress has sought to counteract such misuse of power in 2012 through the STOCK Act, many say it doesn't do enough to prevent insider trading. (2 comments)

Today's Markets

In Asia, Japan +1.1%. Hong Kong +0.2%. China -0.2%. India +0.7%.
In Europe, at midday, London -0.4%. Paris +0.3%. Frankfurt +0.3%.
Futures at 6:30, Dow flat. S&P +0.1%. Nasdaq +0.2%. Crude -1.5% to $78.49. Gold flat to $1855.30. Bitcoin -0.1% to $22,390.
Ten-year Treasury Yield -5 bps to 3.91%

Today's Economic Calendar

10:00 Factory Orders
12:30 PM Investor Movement Index

Companies reporting earnings today »

What else is happening...

Another one! Norfolk Southern (NSC) train derails, but no toxins aboard.

Altria (MO) exits stake in Juul Labs after valuation crumbles.

Why is cancer drugmaker Seagen (SGEN) a top acquisition target?

Price watch: Tesla (TSLA) cuts prices in U.S. to boost sales.

ARM (ARMHF) may be valued at $70B in coming Nasdaq listing.

More trouble? Silvergate (SI) suspends USD transfer network for crypto.

ESPN (DIS), Turner (WBD) get ready to pay - dearly - in new NBA deal.

Apple (AAPL), (AI) make waves in the active AI sector.

J&J's (JNJ) Stelara demonstrates long-term efficacy in Crohn's disease.

Delinquencies on commercial real estate loans rise sharply in Q4.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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