Market Preview Week of Jan 9-13

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Next week is the start of the 4Q22 earnings season and the December CPI Report is on Thursday morning. In addition, KB Homes (KBH) will report earnings for its quarter ended November 30, 2022 Wednesday afternoon which will give us insight into the housing market.

KBH Homes (KBH) Earnings: What I’ll be paying attention to here is New Orders as that is most predictive of the future direction of the housing market. KBH New Orders dropped 50% in their quarter ended August 31, 2022 and a similar drop off in New Orders this quarter would confirm me in my belief that the housing market is rolling over. For whatever reason the homebuilders – including KBH – have had a nice move the last few months which has gotten the technicians bullish. However, price follows fundamentals so I’m anxious to see what they say.

DECEMBER CPI REPORT: The next thing on my radar is the December CPI Report Thursday morning at 8:30am EST. I think most investors are expecting a continuing decline in inflation which will support the Fed in reducing its rate hike on February 1 to 25 basis points. As you can see in the chart above, Fed Futures are pricing in a 76% chance of a 25 basis point hike on February 1.

BANK EARNINGS: Lastly, the big four banks will all report earnings Friday morning. This will be the focus of the week as investors analyze whether there has been any increase in delinquency and default over the last three months as the economy is starting to contract. Has the weakness in the economy started to show in banks’ loan portfolios?

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