ECONOMIC SILUET: 5 things to know before the stock market opens Tuesday

Selasa, 31 Januari 2023

5 things to know before the stock market opens Tuesday

TUE, JAN 31, 2023

MORNING SQUAWK

1. A solid month comes to an end

U.S. equities are about to finish up a strong January in spite of lingering concerns about a recession and the Federal Reserve's rate-hiking strategy to stem inflation. Corporate earnings haven't been too hot, either. Yet, there are also growing hopes that the economy is headed for a soft landing, both at home and abroad (more on that below). Meanwhile, the Fed begins its two-day policy-setting meeting Tuesday, and is expected to increase its benchmark rate by a quarter point Wednesday. The earnings cavalcade continues, as well, with McDonald's and General Motors reporting before the bell, and Advanced Micro Devices after the bell.

2. Global outlook improves

Some good global economic news greeted U.S. markets Tuesday morning. Overnight, the International Monetary Fund boosted its growth forecast for the year to 2.9% from a previous outlook of 2.7%. "Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption and business investment, and better-than-expected adaptation to the energy crisis in Europe," said IMF research director Pierre-Olivier Gourinchas. Indeed, the euro zone helped ease fears of a global recession Tuesday morning by posting surprise growth in the fourth quarter. Despite the good news, though, inflation and Russia's war in Ukraine still pose risks to the world's economy.

3. Big beat for GM

General Motors easily topped Wall Street's expectations for its quarterly results. Earnings per share came in at $2.12, versus $1.69 projected by analysts. Revenue also came in higher than estimated, at $43.11 billion. The earnings report is the latest indiciation that the auto sector is starting to normalize again after dealing with high demand amid a low-interest-rate environment and supply chain snarls triggered by the Covid pandemic. Still, it wasn't all great news for GM, as it reported tightening margins, an issue the industry as a whole is going to need to contend with as price wars heat up.

4. Deal-hungry customers boost McDonald's

McDonald's, like Walmart, is built to thrive during tough economic times. Even though the fast food giant raised prices to keep up with inflation, it is still able to draw masses to its drive thrus and counters as people trade down from full-service restaurants to gobble up value meals and deals. McDonald's on Tuesday posted earnings and sales that topped Wall Street's outlook, as same-store sales grew by double digits in the United States and abroad. The McRib's "Farewell Tour" also helped sales, unsurprisingly.

5. U.S. to end Covid health emergency

The Biden administration will end the national health emergency designation for Covid in May. That means the United States will start treating the virus more as a seasonal health risk, such as the flu. The emergency declarations first implemented by the Trump administration gave hospitals more flexibility in dealing with jumps in Covid hospitalizations, and they allowed people to stay on Medicaid longer. Covid has killed more than 1 million people in America since 2020, although deaths and hospitalizations have decreased dramatically as vaccines became more available and treatment improved.

— CNBC's Mike Calia wrote this newsletter. Samantha Subin, Silvia Amaro, Michael Wayland, Amelia Lucas and Spencer Kimball contributed.

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