The Fuse
Equity futures are pretty soft this am, giving back some of the gains from yesterday. As we approach the end of February the markets are all higher by 5% or more, save for the Industrials which are up a respectable 2%. Leap day tomorrow is the last day of February.
Interest Rates are sliding again as bond buyers continue to bid fixed income higher. However, we have again noticed mortgage rates are above 7%, and junk/high yield are performing well, meaning spreads are very tight. That may not last if the economy starts to stumble.
Michigan primaries last night as Biden and Trump won both races. Gold is losing some ground as is crude oil, inventories will be out later in the day. Fighting continues in Gaza as the world watches/waits for this conflict to settle out. Volatility is low, the market is priced for perfection but if there is a hiccup we could see traders flock to buy some put insurance in a hurry.
Strong earnings from Devon but revenue declined, Axon and Beyond Meat were the big winners along with First Solar, which beat earnings by a mile. Tonight we’ll hear from Salesforce, Snowflake, Okta, IONQ, Marathon Petroleum and Duolingo.
A doji day (indecision) as the bulls and bears nearly finished at a draw. The Industrials were down sharply while the broader markets were up strong, especially the Russell 2K which is trying to mount a rally to best December’s high peak. Once beyond 206 we could see the IWM make a run to all time highs in the 220’s. Stocks are not that overbought here, so end of month window dressing could surprise many today to the upside.
Another day of moderate breadth, but on a day when the Russell 2K moves higher we would expect to see better separation, but it wasn’t to be Tuesday. However, another day of positive breadth moves the needle for the bulls. Oscillators are not overbought here, in fact they say the market has room to move a bit higher in the coming days.
Accumulation days for the indices save for the spx 500, which barely missed the mark from Monday. That’s fine, we continue to anticipated sellers are finishing up. We had a clue to that as we saw heavier turnover come in to the upside over the last hour. That is a bullish sign.
The 5,100 level is still playing hard to get, though we may see a few more tries to mount that level for good. For now, the broadness of the rally is impressive, we continue to see 5,000 as support and then a bit below there is 4,950. Upside could see the 5,300 eventually be reached if the market momentum continues.
The Internals
What’s it mean?
Strong internals thanks to the power in the Russell 2K. This big index dominates breadth readings these days, and when it is strong so are the internals. The VOLD shot higher end of day, though the indices were not moving as fast (though they did finish higher). But the ADD was not as strong nor was the ADSPD. That is telling us the volume has been good but the issues have not been expanding to new highs as much. That can be resolved though, it is simply a condition. Ticks were pretty even all around and the VIX again sank to new lows.
The Dynamite
Economic Data:
- 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:
- 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.
