The Fuse
Equity futures are trying to regain positive status after two straight down sessions. The question here is what is the true mood of the market: What we saw in price action last Thursday or the last couple of sessions of lethargic trade? We should find out more this week and with the end of the month coming up quickly.
Interest Rates are lower this morning as bond traders eye some economic data and comments from the Fed. 2 year yields are slipping, down to 4.69%. Perhaps some of the data today and later this week may help shape monetary policy as the next meeting is only about two weeks away.
Stocks are little changed so far today as the data will be scrutinized in the US. Japan’s 2 year yields were the highest since 2011, sparking calls for the end of a nasty deflationary cycle. China stocks were higher overnight, gold is up modestly while crude oil is still in consolidation. Bitcoin climbed abot 57K for the first time since 2021, investor demand is strong for crypto and several peripheral names were strong Monday.
Earnings out last night from Zoom were very strong as was guidance, this morning a good report but poor guidance from Lowes. Last evening Cava delivered strong numbers but a few companies fell flat, like Workday, CarGurus and Unity. Later today we’ll hear from Devon Energy, Lemonade, Beyond Meat and First Solar.
What we often see after a weekend is some strength in certain groups, and Monday that was clearly technology and small caps. The Russell 2K led the charge most of the session but failed to provide a spark to the rest of the markets. Last week’s strong moves by the SPX 500 and Nasdaq may have been a modest top for now, we’ll have to see the response from stocks later in the week and the obvious window dressing that will happen by Thursday (month end).
Breadth was pretty decent to start with but ended up lower. Stocks were probably much worse off than it appeared at the end of the day but we often see a turnaround session after a poor Monday (call it turnaround Tuesday). In any event, the breadth oscillator continues to fluctuate back n’ forth without much direction, so we wait for a signal when this very reliable indicator tells us better information.
Volume was light across the board as we saw indices fail to advance, save for the IWM. That’s fine, if the market is down it is better when there is less conviction to the downside. Stocks may have gotten ahead of themselves following Thursday’s explosive move higher. If that is the case, perhaps a bit of sideways, low volume action is what we have in store in the next several days.
That 5,100 for the SPX 500 remains elusive on a close. Perhaps we’ll see a run towards it by the end of February, but clearly buyers are not participating here or are just absent. Turnover was low yesterday as mentioned above, but support levels are still a bit lower at 5K and then 4,950. The Nasdaq has good support around 17500 and better support at 17K.
The Internals
What’s it mean?
Pretty heavy volume to the downside as seen by the VOLD here (upper left hand corner). This pretty much tells us sellers were active most of the session. ADD actually was above its worst levels of the day. VIX remains low here while the ADSPD fell hard end of day. Notice the heavy red ticks, telling us heavy sell programs were hitting all day long. Perhaps a turnaround Tuesday is in store.
The Dynamite
Economic Data:
- Tuesday:Durable Good, Consumer Confidence
- Wednesday:GDP second estimate, Crude Oil Inventories
- Thursday:Jobless Claims, PCE January, Pending Home Sames
- Friday:ISM Manufacturing SPX global PMI, Construction Spending, Michigan Sentiment
Earnings this week:
- Tuesday:AMT, SJM, SEE, AXON, EBAY, IPAR, RDFN, SPLK
- Wednesday:DY,, BLD, TJX, HPQ, OKTA, CRM, SNOW
- Thursday:BBY, GDRX, HRL, PZZA, UTZ, HPE, ZS
- Friday:HIBB
Fed Watch:
Fed speakers were out in force this past week emphasizing their view that rate cuts are not coming in a hurry. That may have disappointed the market somewhat, but it is the reality. No doubt the market’s chagrin is going to be felt for weeks as they come more in alignment with the Fed’s forecast. More speakers out this week may give us more information about policy, but for now we have to believe two cuts are about as far as the committee is going in 2024 (down from 2 1/2 cuts). A big slate of Fed speakers this week.
Stocks to Watch
Interest rates – They have slowly been climbing upward as concerns over higher inflation linger. We’ll have some data this week that might dispute the fact.
February Month End – It’s been a pretty positive month for the stock market, getting the year off strong. But perhaps with the next phase of earnings season to come (in March) we may see a bit of a slowdown.
NVIDIA – This was the name last week that everyone moved on, the markets were queued up and ready to fire – the did that. Will there be followthrough? Let’s pay attention here and watch other names in the AI and semiconductor space for answers.
