Markets continued their exuberance today, as traders and investors see a pending 25 bps interest rate hike next week as a sign of slowing Fed tightening. This begets the idea that the worst may be behind us, and — look Ma! no recession… The Dow was +253 points on the day, +0.76%; the Nasdaq grew +223 points. or +2.01%. Splitting the difference today were the S&P 500, +1.18%, and the small-cap Russell 2000, +1.25%.

So far, this has been the best month for the tech-heavy Nasdaq since July of last year. The S&P has crept above 4K for the first time in several weeks. Ten of 11 S&P sectors gained for the session, with only Energy ticking lower. Big tech firms are finally downsizing staff as earnings projections head south — a positive for their stocks. And yet U.S. employment overall remains historically healthy.

Of course, that one phrase above does stick out: “no recession.” We should be saying “no recession — yet.” There are plenty of possibilities where our economy could indeed tip into two quarters or more of negative gains sometime in 2023, so we should not lose sight of this. But with the Nasdaq +9.8% year to date and the Russell +8%, we’re either letting the stern part of the narrative get past us or we’re breathing some life into oversold indices. Perhaps a little of both.

Leading Economic Indicators (LEI) for December slid farther than expected this morning: -1.0%, down 30 bps from expectations and only a tick lighter than the downwardly revised -1.1% the previous month. The LEI sees negative productivity from now until Q4 of 2023. This would point toward recessionary conditions. For Q4 2022, +2.8% GDP is expected in the initial print, following +3.2% in Q3, and two negative quarters prior to that.

Tomorrow is the biggest day yet of Q4 earnings season, with household names Johnson & Johnson (JNJ Quick QuoteJNJ - Free Report) and General Electric (GE Quick QuoteGE - Free Report) putting up results, in addition to Verizon (VZ Quick QuoteVZ - Free Report) and 3M (MMM Quick QuoteMMM - Free Report) . The marquee report comes after Tuesday’s close, with Microsoft (MSFT Quick QuoteMSFT - Free Report) bringing out quarterly numbers. The tech giant is expected to slip -7.7% on earnings year over year while gain +2.3% on quarterly revenues from a year ago. “Mr Softy” carries a Zacks Rank #3 (Hold) into the earnings report.

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