The Week Ahead

Monday	Tuesday	Wednesday	Thursday	Friday
–	Microsoft (MSFT) Alphabet (GOOG) Starbucks (SBUX)	ADP Employment FOMC Meeting  Boeing (BA)	Amazon (AMZN) Apple (AAPL) Meta (META)	Nonfarm Payrolls

Macro Movers

With the first Fed meeting of the year and major labor reports on the docket, this is a pivotal week for market sentiment.

ADP Employment: While the consensus for headline job creation is set at 140k, the real focus lies on the “pay insights” segment. In December, “job stayers” saw a 5.4% wage increase, slightly down from November’s 5.6%, while “job changers” experienced an 8% wage increase, a decrease from 8.2% in November. Ideally, wage increases should hover around or below the 5.4% and 8% benchmarks. If they meaningfully exceed these levels, I anticipate any bearish response to be short-lived, given the market has shown a willingness to acknowledge the path back to 2% inflation is unlikely to be linear.

FOMC Meeting: The Fed is expected to hold interest rates steady. The focus will be on commentary concerning how the robust economy influences future rate decisions. Currently, the market views a rate cut in March as a 50-50 proposition. I think the Fed plays it cool, claims data dependence, and keeps it consistent by making it clear rate cuts are contingent on inflation coming down. In my opinion, the perfect Fed meeting does not create a market-moving event.

Nonfarm Payrolls: This is the most influential report of the month.  The stock market tends to go as this report goes. The forecast for job creation is 180k. A number around or below there would be well-received. However, the money-metrics are unemployment and hourly wages. 3.8% is the expectation for unemployment. This is a “bad news is good news” metric, which means stocks want a number at or slightly above 3.8%. With respect to hourly wages, on an annual basis, 4.1% is the expectation, which is flat compared to the prior period. On a monthly basis, 0.3% is the forecast, which is down for the prior 0.4%. Hourly wages translates to wage inflation: lower is better.

Micro Movers

For a recap of the companies mentioned last week, you can find that here. This week, five of the Super Six – MSFT, GOOG, AMZN, AAPL, META – will dominate the tape.

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The performance of MSFT, GOOG, and AMZN hinges on their cloud businesses. Positive results from cloud provider ServiceNow (NOW) bodes well for robust cloud performance and guidance, which would propel these stocks further.

META relies heavily on continued advertising revenue growth via their social media platforms. Entering an election year, I anticipate advertising metrics to impress, which should boost the advertising businesses at AMZN and GOOG as well.

The situation at AAPL is slightly more nuanced. Despite being loved by investors, analysts tend to turn skeptical as earnings approach. To keep moving higher, AAPL must counter the analysts’ bear case centered on China and the Vision Pro. While China concerns are valid, AAPL has reduced reliance on that geography. The bear case for the Vision Pro seems identical to the bear case made against the Apple Watch. AAPL proved the bears wrong then, I expect they’ll do it again. On a personal note, as a longstanding – perhaps, even stubborn – Android user, if the F1 tie-in is true, I may convert.

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From a broader perspective, the impact of these five companies cannot be understated. A sell-off in the Super Six could trigger a broader downturn; conversely, a positive outcome could catalyze the opposite. As investors, we should, at the very least, hope the Super Six meet expectations to sustain the favorable backdrop that currently exists for new stocks to emerge as winners.

Gorilla Tactics: Boeing (BA) and Starbucks (SBUX)

Boeing gets a mention ahead of its Wednesday report. It got dicey, but BA held $200, and as long as it does, the trade is on. I view the news flow as even. The FAA production cap is concerning, but the MAX-10 certification developments and the MAX-8’s return to China are promising. Consequently, it feels like a coin toss going into Wednesday’s print. 

Starbucks is becoming an intriguing prospect. Antisemitism-based boycotts have led to Wall Street predicting a shortfall, thus lackluster performance as of late. I believe any effects from the boycott will likely be short-lived, but confirmation is needed at the quarter before considering an investment. Beyond the boycott, the company boasts a track record of excellent execution, based uniquely in mass customization—an area where, in my view, no other company rivals SBUX. It makes Starbucks a truly unique asset. 

That being said, I must disclose my recent discovery of Starbucks’ Egg Bites, and my stomach’s happiness might be [is] creating a slight bias. Let’s reserve judgment on SBUX as a Gorilla Tactics candidate until after the quarter.