The Fuse
Equity futures are skittish this morning as traders prepare for the all-important CPI numbers from January. If the trend of slightly lower core inflation continues from December then we may see markets rally and breathe a sigh of relief. Chair Powell is testifying later today in front of Congress in a repeat testimony from Tuesday.
Interest Rates are steady with the fed futures also stagnant but ready to move if the inflation news is right. Currently the market bet is on July for a rate cut, slightly favoring it while June is split right down the middle at 50/50. The 2 yr yield remains stuck at 4.3% and is telling the markets not to expect much on rate cuts for the foreseeable future. There may not be a cut at all in 2025 if the economy remains strong, hence ‘no landing’.
Stocks in Europe showed slight gains, up .2% while in Asia stocks were higher, Japan up .4% and Hong Kong up a fantastic 2.6%, Shanghai higher by .9%>. German 10 yr bund yields up 1bp, US 10 yr treasuries up 2 bps. Gold is down just under 1%, crude oil off 1.2% while silver is lower. The US dollar climbed .1%.
Earnings last night were tremendous from Upstart Holdings, guidance was good and that stock is up more than 20% this morning. DoorDash also beat and raised guidance, while Lyft was disappointing. SuperMicro beat but offered mixed guidance and is doing a private placement, the stock is up 10% early. This morning a beat but lowered guidance by Vertiv, CVS and KraftHeinz out later this am. Tonight we’ll hear from Cisco Systems,Reddit, Applovin, RobinHood Markets, Dutch Bros and The Trade Desk. Tomorrow am DataDog, Deere, Crocs and CyberArk.
Stocks spent the entire day going uphill against the tide of a no bid market. Trying to push a boulder up a hill takes work, and that is how Tuesday’s market went. Not even some words from Chair Powell on the ‘Hill could get buyers interested. There will always be days like this, but during earnings season anything goes. The important CPI is out this morning and that will likely move markets.
Breadth was a non-factor as it was pretty even by the end of the day. Oscillators are split though, the Nasdaq falling below zero as that breadth was weak (thanks to poor technology performance). New highs are still pushing up against new lows, this indicator is on a buy signal. We are looking for new highs in cumulative volume breadth (CVB), as that would aid in bringing markets to new all-time highs.
Not much to write home about with the daily turnover. We have been plagued by poor liquidity here for weeks and it means the towel is wrung completely dry. At some point we’ll see a dose of heavy volume but not right now, especially with so much uncertainty about rates, inflation, tariffs and earnings. Today was a modest accumulation day, we’ll see better volume later in the week.
More tests of lower levels yesterday, good two-way action as stops were hit up and down the market. It simply means the market and futures are in a sideways consolidation for now, a no mans land that will be painful if you try too hard to make money. There will be days like this when it is best to just step back. We still see the 20 day moving average as the best marker for support.
The Internals
What’s it mean?
internals were pretty weak on Tuesday but we expected that after Monday’s performance. The VOLD was poor all day, telling us volume was not supporting the advancers the prior day, so no overflow. The ADD did finish at the highs of the session but just barely above zero line. Put/calls were on the rise, ticks were mostly red while the VIX barely budged after spending time in positive territory. Just a throwaway day here.
The Dynamite
Economic Data:
- Wednesday:CPI, Chair Powell testimony, fed speakers
- Thursday:jobless claims, PPI
- Friday:retail sale, industrial production, biz inventories
Earnings this week:
- 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?
