'Day One' (In More Ways Than One)

What a day! For starters, the United States has a new president this morning and from the "get-go" it has been clear that from whatever perspective one views the spectrum of government and politics, the environment is changed. As always, I will do my utmost to see my path through this environment as an investor/trader traversing all evolving environments and I will do my best to opine on that view or views for those who also hunt and gather their way through life, rather than work for someone else. I will always try to be as publicly apolitical as possible. 

Though at times, personal bias may be apparent, I will try to respect both or all sides. That said, thank goodness, the Treasury Department is now rid of former Secretary Janet Yellen who botched federal debt duration to the point of either incompetence, recklessness or both. She could have pushed out that duration. She preferred to leave her successor an unnecessary mess. Away from duration, in one of her final acts as Secretary of Treasury, Yellen had the agency starting to take "extraordinary measures" that are also known as "special accounting maneuvers," so that the nation might not hit its debt ceiling on the incoming Trump administration's first full day in office. Nice going....

New President Donald Trump signed a plethora of Executive Orders on Day Zero that attempted to undo much of what former President Joe Biden had "accomplished" during his term, which I intentionally leave to be taken by readership both ways so as to support the reader's point of view. Tariffs were not among the initial batch of such orders, as in response to a question posed by a reporter, the new president said that our neighbors may have to wait until Feb. 1. He also said that he had a "very good" phone call with Chinese President Xi and that he was considering a universal tariff on all imports. 

Interestingly, TikTok, which is not a social media platform that I participate in, has been granted a 75-day long lifeline. Elsewhere, those federal employees who incredibly were still working from home since the pandemic, have been ordered to return to the workplace, while federal hiring has been temporarily frozen. Additionally, the southern U.S. border has been closed as a "state of emergency" has been declared, and as the U.S. begins the process of withdrawing from both the World Health Organization and the Paris Climate Accord. Critics, at least of that last move, must be reminded that some of that deal's signatories are among its worst offenders.

Druckenmiller's Take

Perhaps the greatest piece of eye-candy associated with the changes being made in DC for folks like you and me, was the Inauguration Day interview at CNBC of Stanley Druckenmiller. Druckenmiller, who in my opinion is the all-time greatest at what we do for a living, said: “I’ve been doing this for 49 years, and we’re probably going from the most anti-business administration to the opposite. I’d say CEOs are somewhere between relieved and giddy. So, we’re a believer in animal spirits.” 

Hence, the front and center seating for not just Tesla TSLA CEO Elon Musk who is a known ally of the new U.S. president, but fellow CEOs Tim Cook of Apple AAPL, Mark Zuckerberg of Meta Platforms META, and Sundar Pichai of Alphabet GOOGL as well as Amazon AMZN founder Jeff Bezos. 

This does not mean that Druckenmiller is 100% confident in what markets do from here. He added, “In terms of the markets, I would say it’s complicated, you’re going to have this push of a strong economy versus bond yields rising in response to that strong economy, and that kind of makes me not have a strong opinion one way or the other.” 

On tariffs, Druckenmiller is not as concerned as are some others... “We have a fiscal problem, we need revenues. To me, tariffs are simply a consumption tax that foreigners pay for some of it. Now the risk is retaliation, but as long as we stay in the 10% range, ...I think the risks are overblown relative to the rewards, the rewards on high.” 

Now, that is interesting.

Confirmation Day?

Readers will recall that we went into Friday looking for a confirmation of an upward change of trend that had been signaled by that "Day One" action last Wednesday. Markets got exactly what they needed on Thursday, which was a notable pause between that first "up day" on increased trading volume and the next one, which was Friday. Guarantees? You and I both know that in this game, there are no guarantees. That said, we got what we were looking for and this should allow for at least a short while, some dough to be made on the long side of our equity marketplace.

Readers should also note that the U.S. Dollar Index has weakened somewhat since Friday, as longer-dated Treasury yields have relaxed. In addition to these Inauguration Day-focused moves, U.S. equity index futures markets have been strong overnight.

Readers will see that late last week, the S&P 500 bucked against a bearish head-and- shoulders pattern, which is normally a bearish pattern of reversal, that stretched back to October. Suddenly, Relative Strength has dramatically improved from where it was a week ago. The S&P 500, on Friday, recaptured both its 21-day exponential moving average and 50-day simple moving average. Within the daily Moving Average Convergence Divergence, the histogram of the 9-day EMA has pushed through into positive territory as the 12-day EMA has recrossed back above the 26-day EMA. Despite the fact that these two lines remain in negative territory, these are technically bullish developments.

The Nasdaq Composite showed us the same bullish development late last week. Readers will see the "Day One" activity and "Confirmation Day" activity on Wednesday and Friday respectively, on increasing trading volume, that necessarily sandwiched a "down" session on Thursday. 

Readers will note that the index has recaptured both its 50-day SMA and 21-day EMA, which could provoke both portfolio managers and swing traders onsides, as just as above, both the Relative Strength Index and daily MACD have re-postured themselves much more bullishly.

Earnings

According to FactSet, with 9% of the S&P 500 having reported their fourth quarter earnings, 79% of those firms reporting have beaten earnings expectations, while 67% of those reporting have beaten revenue expectations. At this point, for the quarter, earnings growth is running at a blended (results & expectations) rate of 12.5% (up from 11.7% a week ago) on revenue growth of 4.9% (which is down from 5% a week ago).

For the quarter, the Financials are expected to post by far the greatest earnings growth at +47.5%, up from projections as late as last week of +39.5%, with Communication Services in second place at +20.7%. Four sectors are expected to show a year over year earnings contraction, led lower by Energy at -29.9%.

As for the current quarter (Q1, 2025), consensus is currently for earnings growth of 11.6% (down from 11.8%) on revenue of 5.1%. For the full year 2025, Wall Street sees earnings growth of 14.8% on revenue growth of 5.9%. On valuation, the S&P 500 went into this three-day weekend trading at 21.6 (up from 21.5) times 12-month forward looking earnings and 27.7 (flat from last week) times 12-month trailing earnings. These ratios remain well above their respective five-year and 10-year averages.

The GDP Game 

This past week, the Atlanta Fed revised their GDPNow model for the fourth quarter up to growth of 3.0% (q/q, SAAR) from 2.7% the week prior. Among other regional central bank district branches running close to real-time GDP models for the current quarter, the New York Fed revised that estimate for Q4 growth all the way up to 2.56% from 2.36%, while the Cleveland Fed yet again... kept its view for Q4 growth at 1.85%. The St. Louis Fed, however, also revised their model for Q4 GDP growth higher, to 2.39% from 1.91%. 

This week, all of our models are moving in an improved direction, with the exception of Cleveland. I am not sure anyone is still paying attention over there. Perhaps with some new movement in Treasury yields, which is what that model is based on, we'll see some movement this weekend coming.

What's Ahead?

• This week is a very light week for the release of domestic macroeconomic data. On Wednesday, we'll see the December reading for the Conference Board's Index of Leading Indicators. Then, we'll run through the weekly jobless claims report on Thursday to be followed on Friday by December existing home sales, the S&P Global Flash PMIs for January and revisions to the University of Michigan's January's surveys for Consumer Sentiment and Consumer Inflation Expectations.

• The Fed is now in a media blackout period ahead of its policy decision next week. That does not mean, however, that there will be no sightings of the "clown car" that will stop, open its doors and allow a series of funny looking men with painted faces, red noses and giant shoes to pour out. The clown car has been spotted in Davos, Switzerland, where the rich and famous will once again try to make sure people know that they are rich and famous and the last of the misguided globalists will pontificate as if someone should listen.

• Earnings season continues this week. This morning, we'll hear from 3M MMM to be followed this evening by Netflix NFLX As the week progresses, we'll also see quarterly numbers released by Abbott Labs ABT, Johnson & Johnson JNJ and Procter & Gamble PG on Wednesday, GE Aerospace GE, Union Pacific UNP and Texas Instruments TXN on Thursday and finally, American Express AXP and Verizon VZ on Friday morning.

Semiconductor Stock on the Run

No, not Nvidia NVDA or Broadcom AVGO, but long-time industry dog and currently leadership Intel INTC. INTC closed up 12.22% last week after popping for a gain of 9.25% on Friday. What's the deal? The better question might be "is there a deal?" Last week, tech news site "SemiAccurate" reported speculatively on possibly putting Intel in play for an acquisition. 

This rekindled some thought on the topic as this past autumn, the Wall Street Journal had put Intel together with Qualcomm QCOM and Bloomberg News had put Intel together with the already mentioned Broadcom. No, this is not why I've been in this name. I've been in this name because after firing former CEO Pat Gelsinger, I felt that things could not get much worse for the lumbering giant of the industry. Apparently, some of Intel's competitors are thinking similarly.

Economics (All Times Eastern)

No significant domestic macroeconomic data-points scheduled for release.

The Fed (All Times Eastern)

Fed Blackout Period.

Today's Earnings Highlights (Consensus EPS Expectations)

Before the Open: MMM (1.54), KEY (.32), PGR (3.56)

After the Close: COF (2.80), NFLX (4.21), UAL (3.03)

At the time of publication, Guilfolye was long KEY, AAPL, AMZN, NVDA, INTC equity.