Yesterday, the spotlight shifted to other parts of the market, which was refreshing. And banks lend Financials (XLF) for a change. The market finished lower, but I’m encouraged it didn’t collapse without growth leadership.

Consumer Staples (XLP) continues to shape up as an intriguing sector – we are considering overweighting the sector.

Big banks caught upgrades before the opening bell.

Breadth & Style

There was lots of green on the screen as the smaller boxes beamed, but the larger boxes were hues of red.

Large-cap growth continues to outperform. But mid-cap stocks are making a stealthy move. It's time to spy non-tech.

Tripped Up

After the close, two “Magnificent Seven Stocks” (Microsoft (MSFT) & Google (GOOG)) posted financial results along with Artifical Intelligence (AI) darling Advanced Micro Devices (AMD). The numbers were fine, but so much was already built into the names that the initial reaction would always be lower. The longer these names linger, the more time investors have to study the disconnect between their earnings growth and share of the S&P 500 (see above).

Its Fed Day

The Fed will hold, but Powell will speak in March 2024, and sparks may fly. Meanwhile, all bets are off until then.  

Today’s Session

Lots of data this morning including the ADP Jobs Report which came in at 107,000 against consensus of 150,000.

While this isn’t a harbinger for the BLS number that comes out on Friday, there are similarities in trends. Both are moving lower, and I suspect both will reflect slower wage gains.

Speaking of which, the Fourth Quarter Employment Cost Index came in at 0.9% against consensus of 1.0%.

• Inflation saw its slowest growth since 4Q2021.
• Wages and salaries saw slowest growth in 3Q2021.

Some call this a soft landing but I’m not sure because the pace is quickening.

The QRA schedule is out. It’s not moving markets right now; however, it all indicates next week’s auctions are going to take the center stage.

All eyes for the FOMC wrap-up and Powell Q&A session.  For the stock market the question is, will investors buy stocks outside mega cap names or move to the sidelines and cool their heels?

For the bond market, will the ten-year yield remain above 4.00%?

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