The S&P 500 index continued its hot streak as investors continued to be hopeful that the economy may be able to execute a soft landing and elude a recession despite disappointing earnings. All eyes will be on the Federal Reserves’ (Fed) FOMC meeting concluding on February 1. Traders are forecasting the Fed will continue to slow the pace of its rate hikes and raise their key short-term benchmark rate by 25 bps after raising rates 50 bps during its previous meeting.
Despite the strong start to the year for equities, fourth quarter earnings continue to disappoint. 29% of S&P 500 companies have reported fourth quarter earnings with 69% of those companies beating their earnings estimates. As for earnings growth, current year-over-year earnings growth sits at a -5.0%, which would mark the first quarter since the third quarter of 2020 (-5.7%) that earnings growth declined (FactSet).