To The Moon

On Friday (10 Jan), after we saw the release of the nonfarm payrolls report from the Bureau of Labor Statistics, the stocks fell sharply, with S&P 500 closed 1.54% lower, while DJIA and NASDAQ each fell 1.63%.

This is the second straight week that we saw the major indexes posted losses. The nonfarm payrolls report from the Bureau of Labor Statistics showed that U.S. employers added 256,000 jobs last month, well above the 155,000 that economists had estimated. The unemployment rate fell to 4.1%, below the 4.2% rate that was expected.

The jobs report provided the latest evidence of the continued strength of the U.S. labor market and the broader economy. While the economic resilience is good news, it also sparks worries that the Fed would not be in a position to cut rates again as inflationary pressures persist.

The central bank has trimmed its benchmark rate in each of its last three policy meetings—the first cuts in four years—but has warned that the pace of easing will likely slow this year.

The ISM Services PMI showed a notable increase in the Prices Index to 64.4% from 58.2%, surpassing the 60.0% level for the first time since January 2024.

The ADP Employment Change report for December was below consensus at 122,000, while weekly Initial Claims unexpectedly dropped to 201,000.

December's employment report showed a 256,000 increase in nonfarm payrolls and a decline in the unemployment rate to 4.1% from 4.2%.

The preliminary January University of Michigan Consumer Sentiment index indicated a rise in inflation expectations.

S&P 500 Energy Sector The Only One In The Green

The FOMC Minutes from the December 17-18 meeting echoed Fed Chair Powell's remarks, suggesting that the Fed should delay further rate cuts until inflation trends towards the 2% target or there are more pronounced labor market concerns.

There was a broad retreat in stocks this week. The S&P 500 briefly traded above its 50-day moving average before falling below it.

Only energy sector managed to gain 0.34% with support from Constellation Energy (CEG) 25% rise in shares while the other ten sectors ended in losses between 0.57% and 2.46%, with real estate, financials and information technology losing more than 2%.

This resulted in the weekly sector performance with the health care (+0.5%), energy (+0.9%), and materials (+0.1%) sectors closed higher, while the real estate sector experienced the largest decline, dropping 4.1%.

Note Yield Rose Amidst Stronger Job Data

Concerns about persistent inflation and the Federal Reserve's potential to maintain higher interest rates for an extended period were significant factors. The 10-year yield increased by 18 basis points to 4.78%, and the 2-year yield rose by 12 basis points to 4.40%.

This movement was in response to economic releases, including a stronger-than-expected ISM Services PMI for December and a November JOLTS report showing increased job openings.

Stocks To Watch

Shares of $Walgreens Boots Alliance(WBA)$ skyrocketed 27.6%, notching the top performance in the S&P 500 on Friday. The push higher came after the pharmacy giant reported better-than-expected sales and adjusted profits for the first quarter of fiscal 2025. The company noted that while it remains in the early stages of a turnaround plan that includes closing around 1,200 underperforming locations, it is confident in its initial progress.

Despite the 27% gain, WBA is still trading between the short-term and long-term MA period, and this could signal a bullish reversal coming as there is a nice bullish MACD crossover formed.

Though MTF is currently showing neutral, I believe there would be more upside coming this week (13 Jan), and I am planning to take a position if the early signs of upward trend appear for WBA on shorter period MTF.

$Constellation Energy Corp(CEG)$ shares surged 25.2% after the Maryland-based utility agreed to acquire private energy company Calpine. The deal boosts Constellation Energy's footprint in California and Texas and adds Calpine's natural gas and renewable energy portfolio in the Northeast. The company said the combined entity will become the largest clean energy provider in the U.S.

CEG have shown very strong upside performance after we saw a bullish MACD crossover, and it is currently trading comfortably above the short-term and long-term MA, with MTF signalled a strong upward trend, I believe there might be more upward move in its share price in the coming weeks.

Constellation Brands (STZ) shares dropped 17.1%, losing the most of any S&P 500 stock after the beer, wine, and spirits maker reported lower-than-expected quarterly sales and slashed its annual forecast. The owner of the Corona and Modelo beer brands noted that inflationary pressure was weighing down spending on alcoholic beverages while shifting preferences for lower-calorie products also affected demand.

Truist downgraded shares of power and sensor chipmaker $ON Semiconductor(ON)$ to "hold" from "buy" and lowered its price target on the stock. Onsemi's management team believes the company is poised for a recovery in revenue and margins as it emerges this year from a recent period of demand weakness. However, even after a downturn in the stock, Truist analysts are adopting a cautious outlook until estimates are readjusted. Onsemi shares slipped 7.5%

Shares of $Delta Air Lines(DAL)$ soared 9% after the carrier's first-quarter profit guidance came in ahead of consensus expectations. The airline expects strong travel demand in the opening months of the year, and Delta CEO Ed Bastian indicated that 2025 could be the company's best year ever. United Airlines (UAL) shares moved 3.3% higher.

DAL have shown a nice gap up after we saw a bullish MACD crossover formed on 07 Jan, and the MTF is also giving a strong upward trend signal, the strong travel demand in the early months of 2025 would help to push DAL share price higher after the first-quarter profit guidance came in ahead of consensus expectations.

Summary

We might see a short market recovery as energy and airlines stocks could help to push the market into green territory, as investors continue to grapple with the strong labor data which might reduce the number of rate cuts.

Another sector we might need to be concerned would be the retail stocks, as some retail stocks could take hits from the LA Wildfires, $Target(TGT)$ is among the retailers with the most exposure to the deadly wildfires that have raged this week in the Los Angeles area, JPMorgan analysts said Friday.

Sixty-six Target locations, or 3.3% of its total stores, are within the affected region, which includes parts of Los Angeles, Pasadena, Glendale and other areas

Appreciate if you could share your thoughts in the comment section whether you think market could stage a small recovery after investors managed to comprehend how the rate cut decision might move.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.