On Wednesday, the market did an excellent job of shaking off concerns about poor forward guidance from Microsoft (MSFT.) The CEO called 2023 a dead year, but market participants bought early weakness and drove the stock back up, where it closed with just a minor loss.
Tesla (TSLA) reported on Wednesday night, and unlike Microsoft, it jumped higher on optimistic comments in the conference call. Tesla is a more company-specific situation that doesn't impact the broad market as much as Microsoft, but the favorable reaction does help overall market sentiment.
So far earnings season has been generally weak, but there haven't been any major disasters either. Expectations have been relatively low, which has helped to prevent negative surprises. Strategists have been predicting a wave of poor forward guidance that would drive the market to new lows, but it isn't happening yet.
Next week there are several very important earnings reports, as well as the Fed interest rate decision, but market players are optimistic that inflation will continue to fall and that the Fed will be able to navigate a soft economic landing.
What is helping the market most right now is a 'climbing a wall of worry' dynamic. The worries about an economic slowdown are very well known, and it is widely known that strategists and pundits are distrustful of the strength. When the market refuses to drop as expected, the folks sitting on the sidelines with significant cash positions start to put more money to work because they fear that the bearish predictions may be wrong and they will miss out on the upside.
The more money they put to work as they did on Wednesday, the stronger the market action and the greater the fear that a correction will not occur. There is a big supply of cautious folks on the sidelines that want to buy weakness, but when it doesn't occur, they do some buying, and the market climbs up the wall of worry.
We have some economic news hitting this morning and more earnings reports, but most market players are looking ahead to next week's Fed decision and big reports from Apple (AAPL) , etc. We should have a choppy session as positioning takes place.
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