The Fuse
Equity futures are up this morning but only a sliver of what was lost on Monday. That massive rout took markets down several notches as the uptrend from the election has been completely removed. Worries over sticky inflation and slower growth plague the stock market. Tomorrow’s CPI will answer several questions.
Interest Rates are stagnant this am as the safety trade worked on Monday. Rates came down sharply as investors worry more about slowing growth and earnings rather than inflation. Fed funds futures are predicting 3 1/2 cuts this year. That seems a bit unlikely especially given the high level of inflation.
Stocks are trying to rebound a bit of Monday’s losses, futures are up but so is gold and rates are not moving down. Still, STOXX in Europe were only down .1%, gains in France and Germany. The dollar index fell.3%. Gold is up 20 bucks, crude oil higher by more than 1%. German 10 yr bund yields rose 3 bps, US 10 yr treasury yields down 2bps. In Asia stocks were mixed, Japan down .6%, Hong Kong flat but Shanghai up .4%.
Earnings were a miss last night for Oracle though guidance was pretty good. Asana was a disaster. Dick’s and Kohl’s are declining this morning on poor guidance. Ciena beat and guided up.
What a bloodbath Monday as the SPX 500 was down more than 200 points at a time, the Nasdaq down nearly 1000. That would be nearly 5%, something we have not seen since August 2024, but that was short-lived with a VIX spiking to 65%. This time around it appears a different catalyst with weakness in the economy the big reason.
Stocks were brought to their knees Monday, but perhaps an ensuing rally is not far off. Volatility is showing quite a bit of fear.
Clearly the worst trading day of the year in 2025 and the breadth was again horrendous. We noted yesterday that Friday’s breadth while positive was suspect. Monday’s market rout had better than 4-1 negative, oscillators are approaching extreme oversold conditions. New lows are still dominating new highs, that indicator remains on a sell signal.
Another high volume selloff counts as more distribution. These days have been clustering, and that simply means correction territory at best, bear market at worst. It is probably too early to call that, in fact we suspect a big capitulation before we see some sort of bounce, that could be later in the week. Buying this market now is fool’s game..
Horrendous action in the markets as we are seeing a correction happen in real time. At this time there are a few more downside targets to be achieved but reaching a near oversold condition we could see a sharp bounce back soon. The Nasdaq really got pounded yesterday, down more than 3% on heavy volume. We talked about support recently on the NDX at 18,400, the SPX 500 better support (if oversold at the time) at 5,400.
The Internals
What’s it mean?
A truly ugly day for the markets and the internals tell the story. VOLD and ADD were low and finished near their worst levels of the day. Look at TICKS, especially Q ticks which were dominated by red triangles. So was the NYSE, the VIX was cooking all day too, up near 30%. ADSPD did not quite finish at a trend down day but came close. Just a bad day for the markets and it might get worse.
The Dynamite
Economic Data:
- Tuesday:NFIB optimism, job openings
- Wednesday:CPI, federal budget
- Thursday:PPI, jobless claims
- Friday:consumer sentiment
Earnings this week:
- Tuesday:KSS, DKS, VIK, CIEN UNFI, FERG, FCEL, SMSI, HRTG, VTS, BWMN, CASY, GRPN
- Wednesday:ZIM, ARCO, IRBT, MX, AMRN, CXM. ADBE, S, CCI, AEO, TLYS
- Thursday:DG, WB, QBTS, BLDP, VFF, DOCU, ULTA, SMTC, PTMN, RBRK, SOL
- Friday:GOGO, HSON, AIRS, LI
Fed Watch:
No fed speak this week but the committee will be watching the inflation readings closely. Recall the recent miss in PCE, the reading the Fed pays very close attention to. Further, it seems job growth is strong enough to handle the current 4.25% fed funds rate for some time, that will discourage many who are looking for cuts in 2025. It just doesn’t seem in the cards this year.
Stocks to Watch
Volatility – The VIX rose up sharply and remains stubbornly high. There is the notion that high volatility readings can continue until a very large selloff happens. That is likely the case, and the longer we go without it the more pain will be delivered.
Mag 7 – This group of mega tech names has been very weak since the start if February. Can they turn it around? The correction in this group has been deep but so far buyers are not sniffing around just yet.
Inflation – More critical data with the release of the CPI and PPI for February. These numbers have been relatively hot and showing much stickier inflation than ever, so we continue to wait for more inflation of prices dropping.
