The Fuse
Equity futures are up sharply this morning, bouncing back from a heavy down day yesterday. With Chair Powell speaking today about the economy in his bi-annual Q/A with Congress, we have some crosshairs to deal with. Market volatility is down sharply here and that means markets could end up rising by end of day.
Interest Rates are steady here as bonds are also moderating as the market prepares for some heavy auctions this week, and the Presidential Address on Thursday.
Super Tuesday happened and we will have a repeat of the 2020 election between President Biden and Donald Trump. Stocks are rising as is gold and crude oil, where the Saudis raised prices for Asia. ADP said 140K new jobs were created in February.
Earnings last night from CrowdStrike were spectacular, the stock is rocketing higher and bringing stocks up with it. Retailers Ross and Nordstrom delivered mixed results. Tonight we’ll hear from Victoria’s Secret, tomorrow Kroger, Ciena, BJ’s, American Eagle.
Stocks took a beating as the profile of a risk off day was apparent from the start. With bonds up, gold up, volatility up and the dollar flattening there were signs that sellers were going to seize the day, and that happened. However, the response was not a huge rout as one might expect, and that meant the sell pressure was not overwhelming. The action was certainly bearish but maybe a bit overdone.
Poor breadth but not as horrible as one might think it would be. No doubt the bears had control Tuesday but the advance/decline line was not a rout. That simply means there were buyers out there trying to look for bargains. If they show up today that might mean a nice win for the bulls and set the table for a big finish into the labor report.
Heavy volume day across the board means distribution as stocks fell sharply. Monday’s turnover was rather light so it did not take much effort to spill the market. Later in the week might see a bit more volume as news hits and Chair Powell testimony is likely to rattle markets.
We saw 5,100 penetrated and some support tagged near 5,050 and that was enough for some bargain hunters to start nibbling. That zone (5,050-5,065) is now considered good support with resistance up at the highs from Monday, call it 5,165 or so. Nasdaq closed below good support at 18K so that will be worth watching here.
The Internals
What’s it mean?
Stocks hit a rough patch Tuesday but still managed to show some improvement in the internals. No question this was a negative session and the figures reflect it, but notice the rather modest dive in the ADD and VOLD Tuesday. Not a wipeout by any stretch, and while ticks were concentrated red all day the VIX shot higher and did manage to close well under the highs of the day. If this was the spike in front of Chair Powell, labor and more earnings, a move to 12% on the VIX is going to be like cake for the bulls.
The Dynamite
Economic Data:
- Wednesday: ADP report, JOLTS, wholesale inventories, fed beige book
- Thursday: jobless claims, productivity and unit labor costs, consumer credit
- Friday:February employment report
Earnings this week:
- Wednesday:ANF, SPB, FL, VSCO
- Thursday:AEO, BJ, CIEN, KR, AVGO, COST, MRVL. MDB, DOCU
- Friday:
Fed Watch:
Plenty of comments last week with most of the Fed speakers preaching patience and not willing to commit to a timeframe for rate cuts. That is pretty much standard fare though, members preferring to play it safe. A couple of fed speakers this week and then a quiet period before their next meeting in mid March. Chair Powell testifies today and tomorrow on Capital Hill.
Stocks to Watch
SMCI – this hot semiconductor name is going to be added to the SPX 500, announced on Friday.
That could help lift the entire sector one more time, this group has been big outperformers in 2024.
Interest rates – we are again on rate watch, as the 10 year is still threatening to break above the 200 day moving average. There is room for yields to rise if the economic data this week shows strength.
Crude Oil – OPEC+ has said they will continue cutting supply for the foreseeable future. That will put a nice bid under the commodity, and a weekly close above $81 could have oil move back into the $90’s.
