The Fuse
Stocks are mixed this morning but grinding their way higher as the SPX 500 has its sights set on moving past 4,900 this week. As we enter a seasonally strong period (a week or so) for stocks, there are many cross-currents this week but there is plenty of opportunity for stocks to rise as January finishes up midweek.
Interest Rates are falling as bonds rally, we could see small cap stocks catch a bid if yields remain lower. Remember a Fed meeting this week could bring some dovish comments once again.
Not much over the weekend other than the Super Bowl is set with the 49ers to face the Chiefs in a rematch of Super Bowl LIV in 2020. The euro is slipping this am as the ECB hinted last week the EU may start cutting rates in April. Some analysts across the pond speculate growth in earnings will start to slow despite strong revenues. In Asian, Chinese stocks continue to rebound over optimism on stimulus plans. The country is getting ready for a shutdown during Golden Week on Febuary 10th, celebrating Lunar New Year.
A huge week of earnings but today starts if with AI powerhouse SMCI later tonight along with NUE, FFIV, WHR and CLF. Tomorrow am we will hear from PFE, GM, UPS, JBLU, HCA and GLW.
Crude oil was up sharply in the early going as a drone attack on some US troops caused worry about backlash against an Iran-backed group. Middle East developments are starting to get investors nervous, the VIX is climbing early. Later in the week a decision by the Bank of England on interest rates and employment numbers are out as well.
Breadth was poor on Friday but those buy signals on breadth are still on. New highs are also trouncing new lows as that indicator is on a buy signal. ‘Gobs of breadth’, as Tom McClellan likes to say would be a huge positive for the bulls.
Volume was about average as stocks continue to flounder within a range. Given the closeness to some heavy milestones it is understandable the markets need a burst of energy to get going. When those volume trends are apparent we could see a big price move up.
4,800 again remains the best level of support, but the last few days of consolidation may mean the next move for the market is up. Certainly there is plenty of stuff happening that can move markets, with earnings and the Fed along with a heavy dose of economic data. As for a target perhaps 5,200 on the SPX 500, the oscillators are not overbought here at all. The wall of worry remains high.
The Internals
What’s it mean?
Stocks had no fizz on Friday, choosing to languish all day long. The internals really tell the story, the VOLD up with the ADD and ADSPD down says there was little advantage to a trend trader. Notice the heavy red and green in the TICKS, notable because buy and sell programs were evenly distributed. Every time the markets were going to break higher a seller smacked it right down. VIX was up much of the day in anticipation of that action but came down sharply. Lots of positioning in front of a big week to come.
The Dynamite
Economic Data:
- Monday: N/A
- Tuesday:Housing price data, JOLTS, consumer confidence, fed meeting starts
- Wednesday:Fed rate decision, ADP report, crude inventories
- Thursday: Jobless claims, productivity/labor costs, ISM, construction spending
- Friday: Employment report, factory order, Michigan consumer sentiment
Earnings this week:
- Monday: PHG, CLF, FFIV, NUE, SMIC, WHR
- Tuesday: GLW, DHR, GM, JBLUE, PFE, UPS, AMD, GOOGL, EA, MSFT, MDLZ, SWKS, SBUX
- Wednesday: BA, EAT, MA, ROK, KLIC, QRVO, QCOM, WCN
- Thursday: ETN, RACE, HON, LAZ, MRK, SWK, AMZN, AAPL, META, BZH, HOLX
- Friday: ABBV, CVX, XON, CHD, QSR
Fed Watch:
Another huge week for markets as the Fed will sit down for their first meeting of 2024. Fed futures are predicting no change in the current rate policy but perhaps in the statement some wording that might hint of rate cuts. The projections last month pretty much did that, but there is a wide disparity between what the Fed’s reality is versus the market. Perhaps some of that differential will be narrowed this week. The futures market still sees 5-6 rate cuts this year.
Stocks to Watch
Earnings – Thursday is a big day but so is Tuesday, which has AMD, MSFT, GOOGL, SBUX to set the table. Thursday has Apple, Amazon, Meta, Atlassian and others. These earnings reports will definitely drive market volatility.
Interest Rates – With a policy meeting this week we may see big moves in the 2 year yield. Note, the spread between 2’s and 10’s has narrowed significantly as the market prepares for a pivot in monetary policy (soon).
Economic Data – with all that is happening it is also a big week for data (see above). We’ll have the January employment report, ISM data, productivity/labor along with confidence and sentiment data.