The Fuse
Equity futures are modestly down but well off their overnight lows, which saw the opening print down nearly 1.3%. As we move into a heavy part of earnings season expect to see more volatility arise in the days to come. Gold and silver hitting milestones.
Rates are coming down as a nice bid comes into fixed income. We are seeing the 10 yr drop, a few more days of this will be positive for stocks, especially small caps. High yield remains well bid, no recession on the horizon based on these names, 2/10 spread is steady, while fed funds see no move at this week’s meeting, which starts on Tuesday. A policy announcement is set for Wednesday, fixed income investors don’t see much in the way of rate cuts at least until June, the economy is strong.
Stocks overseas were quiet, the STOXX higher in Europe by only .1%, FTSE up strong by .3%. The dollar was flat, gold and silver ripping higher, gold up thru 5K for the first time and silver above 108. Yields are falling a bit in Germany and the 10 yr US treasury, off 2 and 3bsps respectively. In Japan stocks fell 1.8%, Hong Kong up .1% and Shanghai down .1%. Crude oil is showing slight positive here.
Several big earnings names coming up this week with Apple, Meta, Microsoft and others. This will be a pivotal week to see if earnings can help drive stocks higher or not. The test this week should be by midweek after the Fed decision, when the Mag 7 names report. This being end of month, look for some buying to hit especially if the market falls early in the week.
It’s all about the Fed and earnings this week. Some economic data will be released and could be a gamechanger, only if they come out softer than expected. PPI is going to be out later in the week for December. We noticed strong GDP for Q3 last week and now expectations are high for a strong Q4. Small cap stocks have been driving the action, rates are steady and may stay that way for awhile. New highs are not far off.
Breadth was okay this week but failed to be positive on Friday. That follows a modest move up but end of the day this indicator is just clinging to a buy signal. Oscillators are still positive but just hanging on here, a day or two negative means this week move to bearish sign. However, new highs still hammering new lows, that is good support for this market if it continues.
Volume prints this past week were good but expect to see those levels pick up this coming week, due to end of month and big earnings releases. We often see the market players jumping after names following earnings releases. Further, we might see a bit of early week positioning before the Fed meeting.
Was that test of the 50 ma last week, the nasty drop on Tuesday enough to scare everyone? Perhaps, but the buyers came back heavy the next day and nearly wiped out those losses. This volatility is going to be problematic when dip buyers step away. For now, we’ll say this was a good test and perhaps a new high is coming on the SPX 500. Nasdaq presents more of a challenge.
The Internals
What’s it mean?
Just nothing really impressive with the internals on Friday. The VOLD was down most of the day, breadth was weak as seen by ADD and ADSPD, Ticks were evenly distributed while the VIX was just steady. The TRIN was down sharply, and that signals some complacency. Need a good internal reading early in the week to turn the momentum around.
The Dynamite
Economic Data:
- Monday:Durable goods
- Tuesday:Consumer confidence, Fed meeting begins
- Wednesday:FOMC rate decision, Powell press conference
- Thursday:jobless claims, productivity, trade deficit, inventories, factory orders
- Friday:PPI (dec), chicago biz barometer, Miki Bowman, Alberto Musalem (fedspeak)
Earnings this week:
- Monday:RYAAY, BKR, HBT, AGNC, NUE, CR, SANM, AGYS
- Tuesday:UNH, BA, UPS, GM, RTX, SYF, AAL NOC, CVLT, KMB, TXN, STX, NXT, PKG, PPG, FFIV, LRN
- Wednesday:ASML, GEV, T, GLW, GD, SBUX, VF, PGR, ADP, MSFT, META, TSLA, LRCX, NOW, CLS, IBM, WM, LVS, LC
- Thursday:MA, CAT, NOK, NDAQ, RCL, MO, PH, BX, LMT, HZO, AAPL, SNDK, V, WDC, SAP, DECK, EMN, LPLA
- Friday:SOFI, AXP, VZ, CNI, CVX, XOM,, CHTR, LYB, ALV, APD
Fed Watch:
The first fed meeting of the year is upon us and most likely the committee will punt on a rate move. Monetary policy looks to be stable right now, perhaps a cut may be out in the future but for now with a strong economy, job growth happening and some elevated inflation the FOMC is not likely to budge. The market is also in alignment with this thinking.
Stocks to Watch
Tesla – All eyes on Elon Musk this week as many are looking for some new announcements on product development. This is the first quarter the CEO has been focused on the company full-time in a year, perhaps that did some good. Robotics, full service driving metrics should be interesting to read about. The stock has been strong for the past few months.
Apple – All the worry warts are out on Apple this time around, but no question the company had a good holiday period. They often offer soft guidance for the current quarter we are in so that should come as no surprise. The audience is interested in hearing about their AI ambitions and association with Alphabet.
Small cap Stocks – This group has been on fire this year, rising some 9% so far in 2026 but that pace won’t last. IWM is often the driver of the rest of the market, if they sell down we’ll see if that is still the case.
[thrive_leads id=’60674′]
