The Fuse
Equity futures are up strong following some strong earnings from big tech names overnight and some pretty solid numbers from companies this am. A big job report today could stoke an even bigger rally if inflation numbers are tame.
Interest Rates are up slightly as investors are looking for more clues for when a rate cut will be imminent. The FOMC stated earlier this week that March was highly unlikely but their forecast still see three cuts by the end of 2024. The 10 year treasury yield is just under 3.9%. If the jobs report is very weak the markets will start pricing in rate cuts, bigger and sooner.
News
What a night for earnings as a strong report from Meta and Amazon is leading the markets higher. The former just crushed estimates and is up 17% so far while the latter also obliterated their earnings estimates and forecast a strong year ahead. Amazon is higher by 6.6%. This am saw strong earnings from ExxonMobil and Regeneron as well, these stocks may lead the market action today.
Well that was quite an about face! After a drubbing on Wednesday following a likely misinterpretation of Fed Chair Powell the stock market decided that was enough downside. The SPX reached down on Wednesday near 4,900 as that round number seemed to be enough for the buyers to step in, and did they ever.
A strong 1% rally on heavy volume puts the indices now in position to hit much bigger goals this month.
Breadth remains a challenge though not yesterday when the NYSE breadth was very strong. At more than 3.5-1 a/d again (like Monday), a couple more days of strong breadth will do it for the bulls. Teetering on a buy signal here.
As has been the pattern of late volume was suspect early on, a few buy/sell programs but nothing too serious. But as the day wore on and the bulls started flexing their muscle stocks started to become attractive again. The bulls took the markets up near their highs of the day as volume trends turned positive.
The bulls are going to take one more crack at 5K in the coming days. What was that Wednesday drop all about? Clearly buyers are coming after stocks, right? Anyhow, support was established and confirmed on the down day Wednesday with the SPX 500 reaching 4,845 but closing above 4,900 yesterday. This zone is now good support for the index. The Nasdaq has a similar pattern on its chart, with support at 17,125.
What’s it mean?
When the internals are in sync with the price action and other indicators it becomes a very powerful tool. Such was the case yesterday as we see how the late day explosion unfolded. Notice the heavy green ticks on Q and NYSE, a heavy concentration of buyers that came out all day long but really hit the gas during the last hour. Improvement all day long in the VOLD and ADD while the VIX remained tame.
The Dynamite
Economic Data:
- Friday: Employment report, factory order, Michigan consumer sentiment
Earnings this week:
- Friday: ABBV, CVX, XON, CHD, QSR
Fed Watch:
Another huge week for markets as the Fed will sit down for their first meeting of 2024. Fed futures are predicting no change in the current rate policy but perhaps in the statement some wording that might hint of rate cuts. The projections last month pretty much did that, but there is a wide disparity between what the Fed’s reality is versus the market. Perhaps some of that differential will be narrowed this week. The futures market still sees 5-6 rate cuts this year.
Stocks to Watch
Earnings – Thursday is a big day but so is Tuesday, which has AMD, MSFT, GOOGL, SBUX to set the table. Thursday has Apple, Amazon, Meta, Atlassian and others. These earnings reports will definitely drive market volatility.
Interest Rates – With a policy meeting this week we may see big moves in the 2 year yield. Note, the spread between 2’s and 10’s has narrowed significantly as the market prepares for a pivot in monetary policy (soon).
Economic Data – with all that is happening it is also a big week for data (see above). We’ll have the January employment report, ISM data, productivity/labor along with confidence and sentiment data.