The Fuse
Equity futures are sharply higher this morning, shaking off news from new tariffs announced this weekend and also fresh new China tariffs stated on Sunday.
Interest Rates are flat this morning, yields had stopped climbing late last week, fixed income investors waiting to hear what Chair Powell and other Fed speakers have to say this week. Fed futures looking to June or July for the next rate cut but that may be pushed out even further.
Stocks in Europe gained across the board, the STOXX up .4% led by gains in France and Germany. The dollar is lower while gold and silver are ripping higher. Crude oil is higher by more than 1%. German 10 yr bund yields are up 1bp as are US treasury yields, in Asia stocks were mixed as China’s markets both pushed higher, Hong Kong up 1.8% and Shanghai higher by .6%.
Earnings will be on display this week with McDonalds, Coke, Shopify, Upstart, DoorDash, AirBnB, Coinbase, Reddit and many others that will tilt the markets.
Stocks were looking strong for most of Friday but a lack of bid coupled with an exhaustive short term rally (3 days in a row) meant the bulls had to take a back seat. Sellers hit the markets hard late in the session, no bargain hunters came in at all, frankly no surprise as we have seen poor action the past couple of Mondays. Nobody wants to step into that one more time.
Breadth was poor after a couple of positive sessions, but that simply means moving off an overbought condition.
Stocks still look strong with oscillators in positive territory and new highs ramping up lately and crushing new lows. These trends have persisted for some time and may keep the market afloat.
Volume trends have been weak due in large part to the poor liquidity. When the money is flowing freely we often see those funds move into stocks, but when it is erratic there is no pattern of buying. In fact, the turnover this month has been much less on a relative basis than in January, which does not speak well for the next month when the calendar turns.
Support levels continue to be paved and challenged over the last couple of weeks. We have seen the IWM small caps trying to penetrate the 230 level but with little success. The Nasdaq again found support at the 50 ma, while the Industrials were in need of a much larger corrective move, the 20 ma is still below current levels but is rising quickly.
The Internals
What’s it mean?
Internals fell apart on Friday and resumed their bearish nature. The VOLD, ADD and ADSPD tell the story, highs at the start of the day and then straight down. This time the VIX even rallied, probably due to worry about over the weekend risk. Ticks were about even with green matching red. Monday is an important session to see if the bulls can turn things around\.
The Dynamite
Economic Data:
- Monday:N/A
- TUesday:NFIB optimism, fed speakers
- Wednesday:CPI, Chair Powell testimony, fed speakers
- Thursday:jobless claims, PPI
- Friday:retail sale, industrial production, biz inventories
Earnings this week:
- Monday:MCD, TSEM, ON, VRTX, LSCC
- Tuesday:SHOP, KO, HUM, BP, AN, MAR, SMCI, UPST, DASH, LYFT, GILD, WELL, Z
- Wednesday:VRTV, CVS, ABX, GNRC, BIIB, KHC, R, RDDT, APP,HOOD, BROS, TTD, CSCO, MGM
- Thursday:DDOG, CYBR, DE, CROX, DUK, PCG, GEHC, COIN, TWLO, DKNG, AMAT, ABNB, PANW, ROKU, WYNN, RS
- Friday:MRNA, ENR, AMCX, MGA, POR, FTS, SXT, ESNT
Fed Watch:
It’s a big week for the Fed as Chair Powell takes a seat to testify in Congress, the Bi-annual look at the economy. In addition, no less than seven fed speakers will be talking the economy and inflation along with the recent jobs report.
Stocks to Watch
Jay Powell – The first part of his testimony begins on Wednesday in front of Congress. This will be a two-part session (Senate next week). Will he reiterate what was stated at the last meeting?
Inflation numbers – A big week with CPI, PPI and retail sales for January. The first month of the new administration will be some interesting numbers. We don’t expect too much to change yet but the shape of the economy is certainly subject to changes.
Earnings – A huge week of earnings releases that will certainly help move markets. Can the overflow of good news from last week continue on?
