🏛️Fed Rate Decision: “The Federal Reserve left rates unchanged in January, but noted that it won’t be appropriate to cut rates until it has gained “greater confidence” that inflation is approaching its 2% goal. Fed Chair Jerome Powell spoke at a press conference, where he shared details on this latest move.” (CNBC)

👷The January Jobs Report: “The US economy created 353,000 nonfarm payroll jobs in January, according to new data from the Bureau of Labor Statistics released Friday, more than the 185,000 expected by economists.” (Yahoo Finance)

👩‍💻Big Tech Earnings: “Big Tech firms are the harbingers of the AI Revolution’s first wave. Since they’re the most forward-thinking firms in the world, with the most talent and the most resources, they are also the first to embrace and deploy new technologies like AI." (InvestorPlace)

🛍️Consumer Inflation Data: “Even though inflation has come down, consumers are still feeling the pinch of higher prices. This is because the prices are up significantly compared to pre-pandemic. If we compare prices in December 2023 to January 2020, overall prices are up 19%, food prices are up 25%, energy prices are up 26%, and the prices of shelter services are up by 21%.” (Forbes)

📣Talking Feds: "Following a week in which the Federal Reserve raised more questions about the timing of interest rate adjustments, investors will hear from more than a half-dozen Fed officials through the week as they give insight into the Fed's thinking and what recent economic reports mean for future action from the central bank. Also, Treasury Secretary Janet Yellen will testify to Congress on U.S. financial stability." (Investopedia)

🚙Crude Oil Prices: “Oil prices fell by about 2% on Friday and posted weekly losses after U.S. jobs data shrank the odds of imminent interest rate cuts in the world's largest economy, which could dampen crude demand.” (Reuters)

STOCK INDEX FUTURES

JANUARY REHASH

The equity market sustained positive momentum throughout January, culminating in a favorable month-end performance for all major indices, each boasting gains exceeding 1%. The S&P 500 notably achieved a record-high close for five consecutive sessions, driven by optimism from robust economic indicators, expectations of lower interest rates, and bullish sentiment surrounding artificial intelligence.

Despite a lackluster final trading day prompted by the Federal Reserve’s decision to maintain interest rates, the overall gains in January were resilient. During the post-meeting conference, Federal Reserve Chair Jerome Powell tempered investor expectations for an imminent rate cut in March, leading to a downturn in equity markets. 

On January 31, the Dow Jones Industrial Average experienced a 317-point decline, marking a 0.8% drop and its most significant single-day decrease since December. Similarly, the S&P 500 registered a 1.6% slide, marking its worst day since September, while the Nasdaq Composite recorded a 2.2% loss, its most significant daily decline since October.

Despite this setback, January proved to be a solid month for stocks, showcasing the market’s resilience in the face of short-term uncertainties. The positive trajectory observed throughout the month underscores the underlying strength and confidence in the equity markets, supported by favorable economic conditions and ongoing technological optimism.

These were the ten worst-performing S&P 500 stocks in January:

1. Tesla (TSLA) -24.6%
2. Archer Daniels (ADM) -23%
3. MarketAxess (MKTX) -23%
4. Enphase (ENPH) -21.2%
5. Albemarle (ALB) -20.6%
6. DuPont (DD) -19.7%
7. Boeing (BA) -19%
8. Rockwell (ROK) -18.4%
9. Etsy (ETSY) -17.9%
10. Humana (HUM) -17.4%

These were the ten best-performing S&P 500 stocks in January:

1. Juniper (JNPR) 25.4%
2. NVIDIA (NVDA) 24.2%
3. Netflix (NFLX) 15.9%
4. WR Berkley (WRB) 15.8%
5. Catalent (CTLT) 14.9%
6. Palo Alto (PANW) 14.8%
7. Advanced Micro (AMD) 13.8%
8. Cencora (COR) 13.3%
9. HCA Healthcare (HCA) 12.6%
10. Verizon (VZ) 12.3%

INTEREST RATE FUTURES

The rates market interpreted January FOMC communications as modestly hawkish.

The Fed has maintained the funds rate of 5.25% – 5.50%. This decision aligns with market expectations but throws cold water on the prospects of an early rate cut.

The Fed did not commit to imminent rate cuts, but it's inching closer to that direction. The Committee dropped the language that previously left the door open for future hikes, signaling a potential shift toward rate reductions.

While some traders anticipated rate cuts as early as March, Powell hinted this might be unlikely. Yet some traders remain optimistic about a March cut.

A March rate cut is no longer the base case. Powell significantly raised the bar for a March cut by saying, “I don't think it is likely that the committee will reach a level of confidence by the time of the March meeting” (to reduce the policy rate).

One View - based on the outcome of the January FOMC meeting, now look for the rate cut cycle to begin in June and expect 25bp rate cuts in June, September, and December. This would mean 75bp of rate cuts this year.

Every Friday afternoon, Topstep Performance Coach John Hoagland fires up his charts and identifies the trends and “areas of importance” futures traders should look out for in the coming week. Read on to see what John’s keeping his eye on this week!

Coach Dakota~

Take it slow, it's a marathon not a sprint. 

Coach Paul~

Trade right, do not try to be right.

Coach Ray~

Trading confidence comes when you have established an approach to the market.

Coach Jay~

Be conscious of over-optimization. There may not be a need to refine your process, you may just need to trust it long enough to produce positive results.