Day Traders Diary

1/23/23

The major averages rose to start the week as investors contemplated a potential slowdown in interest rate hikes from the Federal Reserve and braced for a busy week of earnings. The Nasdaq Composite surged 2.01% to finish at 11,364, while the Dow Jones Industrial Average rose 254 points, or 0.76%, to end at 33,629. The S&P 500 added 1.19% or 47 points to settle at 4,019.

Shares of Tesla and Apple gained on hopes that a reopening in China would boost their businesses. Both big tech names recently grappled with temporary shutdowns and blows to production as the country dealt with surging Covid-19 cases.

Semiconductor stocks rose Monday, with the VanEck Semiconductor ETF surging 4.7% for its best day since November.

Investors have begun weighing the possibility that the Fed is preparing to slow the pace of its inflation-fighting rate hikes after months of aggressive tightening. Economic data released last week showed a decline in wholesale prices and retail sales. That, and commentary from central bank officials, seemed to signal a slowdown.

Remarks from Fed Governor Christopher Waller Friday seeming to favor a quarter percentage point rate increase at the next meeting lifted investors' hopes for a downshift. A report in The Wall Street Journal Sunday raised the possibility of a spring pause to rate increases — a sign that the Fed could be nearing the end of its rate-hiking campaign.

"Bulls are running with the near-term momentum, the 'soft landing' narrative, and it's hard to argue with recent price action," wrote Jonathan Krinsky, BTIG's chief market technician in a note Monday. "On the other hand, long term trends are still somewhat bearish, and we are always skeptical of such a widely watched 'breakout', especially after big run."

Markets have priced in a nearly 100% chance of a 25-basis point hike, according to CME Group data, which would bring the interest rate to a targeted range of 4.5%-4.75%.

Earnings reports could keep the market on edge this week, with about 40% of the Dow scheduled to release their latest financial results and offer more insight into how companies are weathering inflation and interest rates. Some big names on deck include Microsoft, IBM, Tesla, Visa and Mastercard.