Time Running Out for Laggards as Market Rally Narrows, says BTIG
Investors who have been hoping for a broadening of the market rally may be running out of time, according to BTIG. While mega-cap tech stocks have continued to surge higher this year, the majority of the market has fallen behind. Jonathan Krinsky of BTIG warns that if the laggards fail to make a sustainable bounce this week, it could mean that the recent stock rally is nearing its top.
Mega-cap tech stocks have been the clear winners this year, with Nvidia already surging 23% in January and even Apple, despite facing downgrades, up by 1%. On the other hand, the SPDR S&P Regional Banking ETF is down 0.3%, the Ark Innovation ETF is off by 11%, and the VanEck Oil Services ETF is down by 3%. The iShares U.S. Real Estate ETF and the small-cap Russell 2000 are also in negative territory.
Krinsky explains that when markets have divergences like this, they typically resolve in one of two ways. Either the laggards catch up or the leaders succumb to the laggards. However, he believes that time is running out for the laggards and if the average stock starts to roll over when the super extended leadership names decide to reverse, it could spell trouble for the broad indices.
U.S. GDP Grows at Much Faster-than-Expected Pace
The U.S. economy expanded by 3.3% in the fourth quarter, surpassing expectations. Economists had forecasted growth of only 2% for the quarter. This positive report also included encouraging data on inflation, with the price index for personal consumption expenditures rising 2.7% on an annualized basis, down from 5.9% the previous year. Core PCE increased by 3.2%, down from 5.1%.
Investors are now looking ahead to possible Federal Reserve rate cuts later this year, as the strong GDP growth and lower inflation numbers may give the central bank room to ease monetary policy.
Stocks Making the Biggest Moves Before the Bell: IBM, Tesla, and More
Several stocks are making significant moves in premarket trading. IBM, Tesla, Southwest, American Airlines, Blackstone, Humana, and Alaska Air are all experiencing notable price changes.
Southwest is gaining over 1% before the bell following a better-than-expected financial report for the fourth quarter. The airline earned 37 cents per share, excluding items, and generated $6.82 billion in revenue, surpassing analysts’ expectations.
American Airlines is up more than 4% in premarket trading after reporting strong quarterly earnings. The company earned 29 cents per share, beating Wall Street forecasts of 10 cents per share. Revenue for the fourth quarter came in at $13.06 billion, slightly higher than the expected $13.02 billion.
Blackstone has risen over 3% in premarket trading after posting better-than-expected per-share earnings for the fourth quarter. While revenue slightly missed predictions, the company’s strong earnings performance is driving investor optimism.
On the other hand, Humana is tumbling more than 14% before the bell due to weak guidance for full-year earnings. The health insurance provider expects to earn approximately $16 per share in 2024, well below analysts’ consensus estimate of $29.10.
Alaska Air is up about 1% in premarket trading after releasing its fourth-quarter results. The airline earned 30 cents per share, exceeding expectations. However, the grounding of Boeing 737 Max 9 jets will cost the company $150 million.
Tesla Suppliers and EVs in Asia Drop After Tesla’s Earnings Miss
Shares of electric vehicle makers and Tesla suppliers in Asia are tumbling after Tesla reported lower-than-expected revenue and profit for the fourth quarter. Nio, Xpeng, and Li Auto, as well as Tesla suppliers LG Display, LG Energy Solution, Samsung SDI, and Panasonic Holdings, are all experiencing significant losses.
South Korea Economy Grows 1.4% in 2023, Q4 Beats Estimates
South Korea’s economy grew at a faster-than-expected pace in the last quarter of 2023. Gross domestic product increased by 2.2% compared to the same period the previous year, surpassing estimates. For the entire year, South Korea’s GDP rose by 1.4%. The data also showed that exports grew by 2.6% in the fourth quarter, driven by increased shipments of semiconductors.
Market Hypothetical: If Boeing Was Unchanged in 2024, the Dow Industrials Would Be 308 Points Higher
Boeing’s shares have fallen more than 17% due to safety issues surrounding the 737 Max 9. If Boeing’s stock had remained unchanged in 2024, the