The S&P 500 Rises as Index' Dividend Outlook Improves

The dividend outlook for the S&P 500 (Index: SPX) in 2023 continued to improve. Combined with recent upward momentum, the index closed at 4,070.56, some 13.5% above its 12 October 2022 bottom, but still 15.1% below its 3 January 2022 record high peak.

Here’s the latest update for the alternative futures chart, which indicates stocks running to the high side of the redzone forecast range. That level is consistent with investors focusing on the current quarter of 2023-Q1 in setting stock prices.

The dividend outlook in 2023 has continued to improve over the last two weeks. Here’s the latest from the CME Group’s S&P 500′s quarterly dividend futures:

Meanwhile, the upcoming Federal Reserve’s Open Market Committee meeting this week helps account for why investors are so focused on the current quarter of 2023-Q1, where the market-moving headlines point to expectations of a quarter point rate hike. The Federal Funds Rate is also currently projected to top out on or by the conclusion of the Fed’s March 2023 meeting. Here are the past week’s headlines:

Monday, 23 January 2023

• Signs and portents for the U.S. economy:

• U.S. leading indicators index falls for 10th straight month

Fed minions want to stop subsidizing mortgage rates:

• Fed needs mortgage-backed securities exit plan ‘earlier than later,’ George says

JapanGov minions going into crisis management mode while BOJ minions fiddle around:

• Japan warns of dire finances as BOJ struggles to contain yields

ECB minions’ messaging a mess with rate hikes on tap:

• European Central Bank to raise deposit rate to 3.25% by mid-year
• ECB policymakers spar on rate outlook beyond Feb hike

• ECB rates have to rise significantly at steady pace, Lagarde says
• Analysis-ECB seen struggling to keep market on side after mixed messages

Wall Street extends rally, powered by tech bounce

Tuesday, 24 January 2023

• Signs and portents for the U.S. economy:

• OPEC+ panel unlikely to tweak oil policy at Feb. 1 meeting, sources say

• U.S. oil & gas M&A hit 17-year low; big firms dominate deals-report

U.S. business activity still soft in early 2023, but outlook perks up

Better than expected signs in the Eurozone:

• Euro zone business activity back to growth in January -PMI

• Pressures ease though German economy still shy of growth -flash PMI
• Pickup in French manufacturing offers hope as services sector still weak -flash PMI

Bigger trouble developing in Japan:

• Japan’s factory activity extends declines for third straight month – PMI

Wall Street edges lower as earnings kick into high gear

Wednesday, 25 January 2023

• Signs and portents for the U.S. economy:

• Oil prices steady after smaller-than-expected U.S. crude build
• Analysis-Wall Street heavyweights warn of pain ahead despite market’s recent reprieve

Central bankers still hiking rates:

• Bank of Canada hikes rates, becomes first major central bank to signal pause

• Exclusive-Bank of Canada’s Macklem says he is ‘not even thinking’ of cutting rates

Thai central bank raises key rate as economy recovers, flags further hikes

Australia inflation surges further in Q4, more rate hikes loom

BOJ minions getting ready for new management:

• Japan PM Kishida to pick new BOJ chief while monitoring economy
• Japan cuts economic view as exports to Asia weaken

ECB minions excited to keep rate hikes going:

• ECB’s Nagel, Makhlouf flag interest rate rises beyond March

S&P 500 closes slightly red as weak corporate guidance fuels recession fears

• NYSE says manual error triggered major trading glitch

Thursday, 26 January 2023

• Signs and portents for the U.S. economy:

• Oil settles up 2% on strong U.S. data, China reopening
• U.S. economy posts strong growth in Q4, but with underlying weakness

Bigger trouble developing in Asia:

• South Korea vows support for exporters as economy shrinks

BOJ minions not sure which direction to turn, but ready to keep never-ending stimulus alive:

• BOJ policymakers divided on wage, inflation outlook, Jan meeting summary shows
• Borrowing to drive Japan’s debt over 1,100 trillion yen for first time -draft

Wall Street closes green as GDP data eases recession worries

Friday, 27 January 2023

• Signs and portents for the U.S. economy:

• Oil prices settle lower on stronger supply outlook
• U.S. consumer spending ends 2022 on weaker footing; inflation slowing

Fed minions expected to stop hiking rates in March 2023:

• Fed seen ending rate hikes by March as inflation slows

Bigger trouble developing in the Eurozone:

• Euro zone lending growth tumbles as higher rates bite

• Rising interest rates have a sting in the tail for Europe’s banks
• ECB rejects banking sector call for lower capital to boost lending

BOJ minions busy keeping never-ending stimulus alive despite inflation:

• BOJ deploys funds-supply tool again as yields creep up
• Consumer inflation in Japan’s capital hits near 42-year high, keeps BOJ under pressure

• Japan PM says can’t rule out return of deflation despite price spike

Wall Street ends higher, notches weekly gains as Fed meeting looms

The CME Group’s FedWatch Tool still projects quarter point rate hikes at both the Fed’s upcoming 1 February and 22 March (2023-Q1) meetings, with the latter representing the last for the Fed’s series of rate hikes that started back in March 2022. The FedWatch tool then anticipates the Fed will hold the Federal Funds Rate at a target range of 4.75-5.00% through September 2023. After which, developing expectations for a U.S. recession in 2023 have the FedWatch tool projecting a quarter point rate cut in November (2023-Q4).

The Atlanta Fed’s GDPNow tool‘s first projection for real GDP growth in the first quarter of 2023 is +0.7%, which would be a decline from the BEA’s first estimate of 2.9% real GDP growth in the fourth quarter of 2022. GDPNow’s final projection for real GDP growth in 2022-Q4 was 3.5%. We’ll find out in a couple of months how close they got.