The Fuse
Equity futures are trying to bounce back here as we start the last week of trading in February. Friday’s beatdown was painful and broad across many sectors as investors are not only worried about inflation but also slowing growth and labor changes. NVIDIA is the big earnings report this week.
Interest Rates are falling a bit this morning as fixed income catches a bid. Perhaps some short covering to start the last week of the month, but the trend in rates is still higher. Fed futures are trying to feel confident about pricing in rate cuts in the latter half of the year, but with so many fed speakers this week probably nixing that theory, we may see rates stay steady or rise up more towards 4.5% on the long bond.
Stocks are trying to rebound this morning after a miserable end of the week. There seems to be a nice bid in the market, driven by a short term oversold condition. Stocks in Europe were down slightly, off .2% as France and Germany both had larger declines. Gold is up a bit and still inching towards 3K, silver is pushing 30 while crude is barely changed. The US dollar is down .1%. German 10 yr bund yields were down 1bp, US treasury 10 yr yields off the same, stocks in Asia were lower with Hang Seng down .6% and Shanghai off .2%, Japan was closed.
Earnings are front and center again this week, NVIDIA the one many are looking toward some tech relief. However, retail and other tech like Home Depot, Lowe’s Dell and Vistra will release earnings as well. Should make for an interesting week as March is now the front month for options expiration.
We’ll have the end of the month coming this Friday and Lord knows we could use a clean start in March. Stocks have been all over the place this month and with very low liquidity that makes it harder for the markets to advance without vulnerability. Friday’s action was downright bearish, though the losses stopped just above 6K on the SPX 500. If there is a break this week we’ll have to then monitor the intensity.
Breadth was horrendous as you would imagine. Nearly 3-1 bearish tilt was enough to push the markets over. Oscillators are now firmly in negative territory, new lows printed better than new highs, this indicator is neutral. Can the bulls regain control here or will there be more downside? It’s a good question and perhaps we see if breadth continues to be poor.
Volume was pretty heavy as this was a heavy dose of options expiration, double witching style. More than 2.7 trillion of notional value came off by the close, of course much of that was rolled forward. Still, heavy volume prints to the downside like in Friday mean only one thing: distribution! Big institutions selling stocks indiscriminately. We have had a few of these recently and if they cluster there are bound to be more down days and a change in trend.
The SPX 500 tried to test the 6K mark on Friday but did not make it, but certainly did close near the lows of the day. Industrials were awful but not as bad as Nasdaq and Russell 2K, which fell 2% and 3% respectively. Just a nasty day that took these indices down sharply to support, the Nasdaq to the 50 ma and the small caps to the 200 day moving average. More days similar to this will be bad news for the bulls.
The Internals
What’s it mean?
Just a miserable day for the internals led by the VOLD and ADD, which closed at their worst levels of the day. No question the rout was signaled earlier in the week with poor volume trends are a lack of buying interest. Ticks were a solid red, especially in the Nasdaq where a concentration of sell programs hit all session long. The VIX spiked as well but closed off the highs of the session. Monday will be important to see if this follows through.
The Dynamite
Economic Data:
- Monday:N/A
- Tuesday:home price index, consumer confidence, fed speakers
- Wednesday:new home sales, Atlanta Fed’s Bostic
- Thursday:jobless claims, durable goods, GDP 2nd look, pending home sales, fed speakers
- Friday:personal income/spending, PCE, inventories, Fed speakers, trade balance
Earnings this week:
- Monday:DPZ, AZUL, HIMS, CHGG, TEMP, ZM, CLF, FANG, IOT
- Tuesday:HD, KDP, PLNT, DOCS, ALIT, DNUT, CAVA, AMC, AXON, FSLR, CART, LCID, WDAY, LMND, ZETA, INTU
- Wednesday:LOW, NRG, AAP, YOU, STLA, NVDA, SNOW, CRM, AI,JOBY, IONQ, ROOT, NTNX
- Thursday:VST, NCLH, TD, OPRA, SOUN, DELL, ACHR, CLOV, SMR, DUOL, RKLB, OPEN
- Friday:FUBO, WULF, GTLS, AES, FRO, BFLY APLS
Fed Watch:
Recent comments from Fed speakers indicate their reluctance to bring rates down further. After 100bps of cuts in 2024 the committee is now worried inflation is going to reignite. They have been concerned about rising core prices and also how the new administration’s tactics will work. To be sure, inflation is not going away, Michigan sentiment on inflation expectations ballooned to 4.3% in 2025.
Stocks to Watch
NVIDIA – The last of the Mag 7 will be reporting earnings, this comes out Wednesday evening. Plenty of worry and concern but it may be priced in. I can’t imagine they will say anything negative and may boost guidance once more.
Volatility – We again have our eyes focused on the VIX, which spiked on Friday and is now threatening a move into the 20’s. A little volatility is fine to set up nice opportunities, but if it starts trending higher then this market uptrend is in jeopardy.
Retail – Some big retailers out this week including Lowe’s and Home Depot will give us a nice picture of how the consumer is holding up after the holidays.
