US stocks are trading higher Friday but still on track for a ~1.5% loss for the week (for the S7P 500 as of 2:00 PM EST Friday) as investors digested a mix of growth data and an uneven cadence of earnings that may have compelled some investors to move to the sidelines even as the broader global growth picture continues to improve amidst a better outlook for China and Europe and decelerating inflation in the US.

On the macro front this week, the soft landing camp was dealt a blow when December activity, both retail sales and industrial production, may have been a bit less robust than many had anticipated.

While business sentiment remains negative, it may also be forming a bottom given the improving dynamics in the Philly Fed, which came in above expectations.

Also encouraging, PPI came in very light, rising by only 0.1% mom for a core measure, providing further evidence that the post-pandemic inflation spike that began in the summer of 2021 may turn out to be transitory after all.

Interestingly, despite a steadily improving inflation trend and a benign rates environment — stocks traded lower on the week.


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Index players remain concerned that valuation may place a ceiling on index performance in the year ahead, even as fundamental catalysts emerge. The S&P 500 is trading up near an 18X forward P/E multiple — a valuation level not typically seen outside of the Tech bubble (either the one in 2000 or the latest one in 2021).

A range-bound index, however, can still be fertile ground for alpha; but it’s one where traders make money and investors get bored.

With some semblance of US risk appetite returning, 2023 favourite trades trend to form. The EURUSD may close the week above 1.0850 on improving EU growth dynamics while the China reopening plays are thriving, with Oil prices again leading the charge in the US session


Published by Stephen Innes, Managing Partner, SPI ASSET MANAGEMENT