Strong earnings and inflation data have boosted the US stocks in Jan

 

Stocks rose on Tuesday as strong earnings and encouraging inflation data put the S&P 500 on track for its best January in four years.

Traders have assessed how some of the largest firms are faring amid high inflation and fears of slowing consumer spending.

Overnight, The Dow Jones Industrial Average rose 1.1 per cent. The S&P 500 gained 1.5 per cent, whilst the Nasdaq Composite added 1.7 per cent.

Investors on Tuesday got bullish news on the inflation front before the Federal Reserve’s latest decision on interest rates. The employment cost index, which is an important measure of wages eyed by the Fed, showed compensation increased 1 per cent in the fourth quarter. It was below the 1.1 per cent estimate from Dow Jones. Traders widely expect a quarter-point increase in rates by the Fed, but they are hoping softening inflation will cause Chairman Jerome Powell to signal a pause in tightening in the near future.

Stocks have had a stellar start to 2023. The S&P 500 and Dow are up more than 5 per cent and 2 per cent in January, on pace for their third positive month in four. The Nasdaq Composite has risen about 10 per cent this month, headed for its best monthly performance since July. Strong earnings have contributed to this.

Overnight, PulteGroup shares surged more than 8 per cent after the homebuilder reported better-than-expected earnings. Shares of Exxon Mobil also rose more than 1 per cent following earnings.

General Motors shares jumped more than 8 per cent after the largest auto manufacturer in the US posted solid earnings. The car company also announced some big news that they are making a $650 million investment in a lithium mine in the US to secure raw materials for electric vehicle batteries, a record investment by a carmaker. The initial investment of $320 million will give General Motors exclusive rights to the first stage of lithium production at Thacker Pass in Nevada, and a 10 per cent stake in Lithium America, with a further $330 million to follow.

On the other end of the spectrum, Bed Bath & Beyond is reportedly preparing to file for bankruptcy as soon as this week, with liquidators lined up to close additional stores. The company is in talks to secure a loan from investment firm Sixth Street and has already closed 87 Bed Bath & Beyond stores and five buybuy BABY stores, in addition to 150 closures announced last year.

The S&P 500 sectors performed well overnight. Materials and Consumer Discretionary were the best, each closing by 2.2 per cent.

To Commodity related news, the Philippine government is planning to impose an up to 10 per cent tax on nickel ore exports.

However, the proposed tax on nickel ore exports in the Philippines could "kill" the industry according to Dante Bravo, the head of the Philippine Nickel Industry Association. Bravo is advocating for the government to understand the industry's stance on the proposed tax, which is aimed at encouraging local miners to invest in processing instead of just exporting raw ore.

The Philippines is the second largest producer of nickel in the world, with a global market share of 13 per cent, so this will no doubt trickle down to Australian nickel players.

Demand for gold reached a high in 2022, fueled by central bank purchases that demonstrated the asset's appeal as a safe haven during geopolitical turmoil. The World Gold Council reported that gold demand increased by 18 per cent to 4,741 tonnes last year, driven by a 55-year high in central bank purchases and retail investor purchases to protect themselves from high inflation.

The anticipation of reduced interest rate hikes by the US in 2023 has weakened the US dollar's strength, which will potentially drive up gold prices further.
 
Futures

The SPI futures are pointing to a 0.6 per cent gain.

Currency

One Australian dollar at 8:10 AM is buying at 70.57 US cents.

Commodities

Iron ore futures are pointing to a 0.6 per cent gain.

Gold added 0.2 per cent. Silver gained 0.4 per cent. Copper rose 0.6 per cent and oil jumped 1.5 per cent.

Figures around the globe

Across the Atlantic, European markets closed mixed. London’s FTSE lost 0.2 per cent, Frankfurt closed flat while Paris was closed.

In Asian markets, Tokyo’s Nikkei fell 0.4 per cent, Hong Kong’s Hang Seng dropped 1 per cent while China’s Shanghai Composite closed 0.4 per cent lower..

Yesterday, the Australian sharemarket closed 0.1 per cent lower to close at 7,477.

Ex-dividends

AMCIL (ASX:AMH) is paying 1 cent fully franked
Euroz Hartleys Group (ASX:EZL) is paying 2.5 cents fully franked
NB Global Corporate Income Trust (ASX:NBI) is paying 0.7111
Partners Grp Global (ASX:PGG) is paying 1.1833 cents unfranked

Dividends payable

Tower (ASX:TWR)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

Disclaimer

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