By Barbara Kollmeyer
Critical information for the U.S. trading day
Ahead of major tech earnings later, Meta results are lighting up the Nasdaq Composite for Thursday. The S&P 500 is also up as investors take a glass-half full view of the Fed meeting.
Worried that investors are in the clutches of another Fed misread is the founder of LaDucTrading.com, Samantha LaDuc. "The market is not pricing either higher terminal rate or growth slowdown or recession. One or more of these assumptions is wrong. My bet: Fed goes higher for long. They don’t cut in 2023, unless they have a reason to," she says.
MarketWatch last spoke to LaDuc, who specializes in timing major market inflections, last May when she predicted the S&P 500 would finish 2022 around 3,800 — it finished at 3,859. Another call she nailed was her early 2022 warning of a coming "tech wreck," predicting a 20% Nasdaq slump in 2022 — it ended the year down 33%.
In our call of the day, LaDuc says cash is the place to be and that investors are "being paid to wait. They’re getting very favorable 4.5% on their sitting cash."
Even though the dollar has lost 8% in the last 12 weeks, "the money you put in money-market funds is earning 4.5% right now, whereas before it was earning 0.4% or 0.5%," she said in a Wednesday interview.
"So the Fed hiking has motivated a kind of paid-to-wait while the market stabilizes. I don’t think Treasurys are a safe bet for this year. I really can see no outperformance in bonds, and I think equities have more risk to the downside than upside," said LaDuc.
She’s specifically worried about tech, saying the Nasdaq likely has one leg down left to go before the selloff is all over.
Read: ‘Won’t get fooled again’? Nasdaq jumped more than 10% in January. Here’s what history shows happens next to the tech-heavy index
She explains that analysts are predicting an earnings recession through the fourth quarter of 2023, and not an economic recession. "They literally expect Q4 to pop up about 10% in earnings because of favorable comps– comparisons for the prior year.
"The problem with that is that the earnings analysis does not in any way, shape or form consider a recession, and it absolutely assumes moderate growth," says LaDuc. "So we still have Goldilocks all priced in equities and priced into earnings."
A growth to value rotation has been a key prediction for LaDuc since July 2020 when she started to call for "things over paper," predicting a shift to oversold commodities, cyclicals and large-cap value plays with rates bottoming.
While that rotation "absolutely outperformed" in both 2021 and 2022, she says it will trade less well this year because inflation expectations have come down.
The bottom line? Rather than buy that stock market dip, investors should short the rip higher, she says.
Her last observation is tied to gold — and she says she’s not a gold bug, but that her trend indicators are now "firing" for the precious metal for the first time in years.
Gold can be a tough call because it has to be "timed perfectly" and typically isn’t an outperformer, apart from a 1970s ride higher as an inflation hedge. What has changed is that last year central banks bought the most gold last year since 1967
"It’s the lack of counterparty risk that is driving the central bank desire for more control of gold that bears watching right now," said LaDuc.
The markets
The Nasdaq Composite is surging on Meta boat-lifting, with the S&P 500 also higher, but the Dow industrials slightly lower. Bonds are steady, oil is flat, with gold , silver and other metals up.
The pound has bounced off lows after the Bank of England hiked interest rates by 50 basis points as expected. The European Central Bank made the same move, and said it will repeat that hike in March.
For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily
The buzz
Meta shares (META) are up 19% after the Facebook parent missed earnings, but gave upbeat 2023 revenue guidance and promised more buybacks.
Opinion: Zuckerberg and Intel are shipping the proceeds from their layoffs straight to Wall Street
And big names will report after the bell — Apple (AAPL), Alphabet (GOOGL) and Amazon.com (AMZN) , Ford (F), Gilead (GILD), Starbucks (SBUX) and Qualcomm (QCOM).
See previews for:Apple , Alphabet and Amazon
Merck (MRK) stock is down after profit disappointed, Honeywell (HON) is falling on a revenue pullback, Eli Lilly (LLY) is falling for the same reason and Bristol Myers (BMY) said it expects a revenue fall, but shares are steady..
Baidu stock (BIDU) is higher after climbing in Hong Kong on Thursday’s news that BlackRock raised its stake in the Chinese internet-search giant to 6.6% at end of 2022.
Adani Group companies market cap losses are up to $105 billion after the Indian conglomerate canceled a $2.5 billion share sale, as fallout from a scathing report from U.S. short seller Hindenburg Report continues to take toll.
Weekly jobless claims came in at a lower-than-expected 183,000, while unit labor costs rose 1.1% in the fourth quarter, under expectations for a 1.5% gain. Factory orders are coming at 10 a.m.
Best of the web
‘The Last of Us’ in real life? Rising temperatures may be spreading fungal infections, research says
As China and the U.S. both woo resource-laden Indonesia, Beijing has the edge
College Board revises AP course in African American studies thrust into spotlight by Florida Gov. DeSantis
The chart
Get used to companies shedding workers?
The tickers
These were the top-searched tickers on MarketWatch as of 6 a.m. Eastern:
Random reads
Reporter’s deadpan ode to surviving gloomy February goes viral.
With no more king…Australia strips Charles III off its banknotes
How Punxsutawney Phil can be a stock market indicator
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton.
-Barbara Kollmeyer
(END) Dow Jones Newswires
02-02-23 0939ET
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.
© Copyright 2023 Morningstar, Inc. All rights reserved. Dow Jones Industrial Average, S&P 500, Nasdaq, and Morningstar Index (Market Barometer) quotes are real-time.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.