The Fuse
Equity futures have reversed course from yesterday, wiping out some nice gains from Monday. The price action was strong yet the indicators and internals were not impressive. This leads us to believe some short covering was responsible for the action Monday, which often leads to more buying when liquidity is strong. It is not all that strong here but may improve soon.
Interest Rates are higher again, taking a cue from gold and silver. Precious metals up mean that inflation continues to be around for the foreseeable future, and that puts pressure on bonds. We’ll hear from several fed speakers today and Chair Powell tomorrow. Any hint of rate cut suspension is going to draw ire from the bond market.
Stocks are falling pre-market but in Europe stocks were unchanged, France did gain some ground. the US dollar was flat while German 10 yr bund yields rose 2bps, US treasury 10 yr yields up 1bp. Gold is off its highs after a spectacular day Monday putting the metal at all time highs. Stocks were down in China while markets in Japan were closed.
Earnings last night from Vertex were not spectacular, the stock weaker this morning. Shopify beat on the bottom line but missed badly on revenue, Coke with a nice beat top/bottom line on share gains, Humana beat modestly and says 2025 is a crucial year. Auto Nation earnings fell but revenues pushed higher and beat estimates. Tonight we’ll hear from SuperMicro, Upstart, DoorDash, Lyft, Freshworks, Gilead Sciences, Zillowand Welltower. Tomorrow am CVS, Vertiv, Biogen, Barrick, Generac and KraftHeinz.
A super day for the markets Monday, stocks started higher after dumping on the opening print futures Sunday night and rallied sharply. This price action is positive though the rally was not as broad as we would have liked to see. Evidently investors are content waiting on inflation data and the Fed speakers today.
Breadth was positive and turned around Friday’s weak numbers, but it was not convincing. With the markets up so much one would expect to see better than 15-10 on the ledger, but the bulls will take the victory and walk away happy. Oscillators are back on the positive side, new highs continue to beat new lows on a daily basis, that indicator remains on a buy signal.
Volume once again was poor on an up session as that leaves the new buyers vulnerable to a pullback. This being turnaround tuesday, it could mean some backing n’ filling from yesterday’s intraday gaps, which are often retraced to find a balance of buyers and sellers. That will bring in more turnover though, and if buyers step in that will lead to more bullish action. As of now, liquidity remains poor as there is little reason to stretch into risk with so much uncertainty (like tariff bombs every other day!).
If the market stays down today we might see short term support levels tested, like the 8 or 10 day moving average. These very short term MA’s tell us little about the market trend but give us good information about money flows into stocks under duress. The 20 ma is the marker we prefer to use to determine trend and holding support, nearly tested across the board on Friday. The IWM small caps sit right on support, the Industrials, in need of a pullback are getting it and may test that 20 ma later this week.
The Internals
What’s it mean?
Monday was an up day but the internals were not all that strong, indicating some weakness surrounded the bulls. Look at the ADD, which peaked early and started to decline fast. VOLD was up but did finish weaker, VIX declined but that did not help stocks late in the day. Ticks were even moderate all session, buy and sell programs all day long. We would like to see some improvement but with turnaround tuesday that might not happen for a day or so.
The Dynamite
Economic Data:
- 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:
- 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?
