The Fuse
Equity futures are dragging their feet this morning as market players await the important retail sales report from January. There is not much of a bid from overnight but that can change quickly with news.
Yesterday’s rally was broad and inclusive of all groups large and small, something we have not seen for awhile. Another three day weekend is upon us, we may see a dip in volatility once again.
Interest Rates are slightly higher across the board after falling sharply Thursday. We continue to believe rates will be steady this year between 4.1-4.8% on the 10 yr, while the 2 yr yield is like to be in the range of 4-4.5%. Fed futures are seeing very little chance of a cut this year, even a small bit of a chance for a hike by December (2.2%).
Stocks are modestly lower in the pre-market, helped by modest losses in Europe (STOXX down .1%) as Germany fell but France rose up slightly. Gold is higher, crude is up .5% and silver is ripping higher.
The US dollar fell .1%. Stocks in Asia were mixed, Japan down .8% but Hong Kong ripped higher by 3.7%, Shanghai gained.4%. German 10 yr bund yields rose 2 bps, US treasury yields up 1bp overnight.
Earnings were big last night, AirBnB with a big beat and raise has that stock up by 14% this morning. Applied Materials and Palo Alto with mixed results, those stocks are lower this morning, Roku higher as is DraftKings, Coinbase with a big beat is largely unchanged.
Strong day for the indices as the hotter than expected PPI had little influence to bring markets down. Unlike Wednesday, there was an insatiable bid for stocks that was relentless. Strong internals and statistics saw traders take markets up near all time highs, today might be the tipping point as strong volume and breadth were the key drivers in Thursday’s outstanding performance. Not even tariff news could derail the bullish train yesterday. Retail sales out early this morning.
Finally some good breadth brought on by solid earnings and guidance. Stocks decided three poor breadth days was enough as traders pushed stocks to the upper right. Breadth was decidedly bullish, 21-6 rout on the NYSE with bullish oscillator readings that brought both the NYSE and Nasdaq into positive territory. A couple more days and this indicator will be overbought and probably due for a correction, but right now the bulls are running hard. New highs just crushed new lows again.
Volume was pretty good yesterday, and yes an accumulation day on the SPX, QQQ and DIA for the first time in awhile. Bulls like to see strong volume trends develop when the market is starting to break out of a range. That was evident yesterday but as always we like to see go followthrough, so today’s action is critical for keeping this bullish trend going.
Maybe the multiple tests of lower levels the past week or so made a difference. Stocks pushed higher yesterday even with inflation-induced news on the PPI. Interestingly enough, the test of lower levels following the CPI were not even relevant yesterday, meaning a modest pullback was enough to get sidelined traders off the couch and back in the game. New highs are being closely watched here and how far stretched the indices will move away from the 20 ma, which is now the best (closest) level of strong support.
The Internals
What’s it mean?
WHAT A ROUT FOR THE BULLS! It has been awhile since we had this sort of lopsided action, but the bulls clearly won out. Looking at all the internal mechanisms there was bullishness all around. The TICKS were mostly green all session, heavy dose of buy programs all day long. VOLD finished highs of the session, and the ADD actually did as well, what an feat! ADSP showed nearly a trend up day, the VIX plunged after the release of the PPI. Today’s retail sales should create some volatility but end of week into a 3 day weekend should count for more.
The Dynamite
Economic Data:
- Friday:retail sale, industrial production, biz inventories
Earnings this week:
- 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?
