The Fuse
Equity futures are down modestly this morning as the markets prepare to hear about inflation last month with the CPI released and the kickoff of earnings with banks and Delta.
Interest Rates had moderate moves yesterday but they seem to be trending higher on the long end of the curve. The 30 yr is up a bit today in yield, the 2/10 spread widening a bit. Fixed income players are waiting to see how the inflation reading is with consumers in December, high yield remains well-bid while fed funds futures have backed off significantly.
Stocks in Europe were up modestly, the STOXX higher by .1%, FTSE added the same. Crude oil is on the rise with turbulence in Iran and Venezuela causing some worries in the oil pit, gold is off but silver reaching new highs again overnight. In Asia stocks were mixed, Japan up a robust 3.1%, Hong Kong up nicely, .9% but Shanghai dropped .6%>. US 10 yr treasury yields up 1bp.
Earnings so far this morning have JPM with a nice beat but conservative guidance, Delta missed revenue expectations. Tomorrow am we have WFC, BAC, Infosys, in the evening HB Fuller.
It’s not how you start but how you finish that matters! Stocks were down for the count at the opening bell, with some news over the weekend driving sellers to flee but after the first 10 minutes of trade those heavy losses were a distant memory. No doubt after last week’s strong surge the markets are due for a rest, but with earnings season upon us no rest for the weary. Banks start the engines today.
Breadth was just okay yesterday, that’s all we can say about it. If the small caps were down that would not be the case, but let’s call this a resilient day. Oscillators still in positive territory, it seems the market is looking for an excuse to correct in time or price, we’ll see if news kicks off some selling. We saw new highs continue to kick new lows.
Lower turnover was the signal of the day, not much selling conviction early on as the buyers came swarming in after the opening bell. Volume pretty much remained stagnant, volatility sellers trying to figure out when to strike, after all holiday weekend is upon us and we often see vix falling into that holiday. Friday being a big options expiration too, we should see some big volume prints.
It sure seems like the markets want to come down a bit to test lower levels, and that time could be at hand. We don’t expect to see too much selling during earnings season, and if the market does indeed correct from an overbought condition it could be a sideways move, and that would be very bullish as the moving averages catch up to the price action.
The Internals
What’s it mean?
What seemed like an odd day for the internals early turned into a positive session by the end of trading. VIX gapped higher but that was it, started declining from the start and finished near lows of the session. Ticks were solid across the board, buy programs started from the opening and never let up. Put calls are starting to come down again, VOLD and ADD moderate gains on the day. We’ll call this a modest win for the bulls.
The Dynamite
Economic Data:
- Tuesday:CPI, NFIB optimism, new home sales, more fedspeak
- Wednesday:retail sales, ppi, biz inventories, home sales, beige book, lots of fed speak
- Thursday:jobless claims, empire state, philly fed, fed speak
- Friday:industrial production, cap utilization, Barkin and Jefferson speak
Earnings this week:
- Tuesday:JPM, DAL, BNY
- Wednesday:WFC, C, BAC, INFY, HBF RFIL, HOMD
- Thursday:TSM, MS, GS, BLK, BSVN, JBHT
- Friday:RF, STT, PNC, MTB
Fed Watch:
This is an important week for the fed, not for decision making but because so many speakers are out talking about fed policy and the economy. Seems the only one NOT talking is Chair Powell, but with so much division at the time it seems relevant to listen to every participant’s view and where they stand. The first meeting with some new voting members is end of the month.
Stocks to Watch
Silver and Gold – Again, the metals are on fire and pushed to highs last week. Seems the momentum is strong here and that could last for some time, pullbacks have been buying opportunities.
Crude oil – Since last week’s invasion of Venezuela the price of crude only rose up modestly. That should change soon, futures market sees higher prices soon and with any supply disruption that will happen quickly.
Banks/Financials – Kicking off earnings season are the big banks this week. Did they run too far? It’s possible, but earnings should be fantastic anyway.
