The Fuse
Equity futures are rockin’ today as we come close to the end of February trading. We could see traders ‘paint the tape’ today with buys coming in later in the day. Earnings are still the driver though and after a few weak sessions this one might just stick.
Interest Rates are popping up this morning as fixed income investors take a risk on approach. The 10 yr still hovers near 4.25%, which is exactly where Fed funds are sitting. It is not common to see this similarity occur. Fed funds futures are still expecting about 1 1/2 rate cuts in 2025, that may be a bit optimistic.
Stocks are rallying again this morning on the back of earnings. The STOXX in Europe was down .7% led by Germany and France declines. The US dollar climbed .2%. Crude rose up 1% as it makes a move on $70, gold is getting slammed, down more than 1%. German 10 yr bund yields were flat while US treasury 10 yr yields rose 3bps. In Asia stocks were mixed, Japan gained .3% whereas Hong Kong slid .3%, Shanghai up slightly.
Earnings from NVIDIA were released last night and naturally they beat but not the high expectations of the market. Still, strong growth and momentum in their business but perhaps the stock is now reflecting (priced in) that growth. Snowflake had great earnings and guidance, Ebay missed all around and isgetting punished today. Also strong earnings from Nutanix, Salesforce beat but guided lower. Tonight we hear from Dell, Duolingo, RocketLab and a few others.
Some heavy volatility yesterday as the markets waited with baited breath for NVIDIA earnings to be released. They were better than expected of course but are not pushing higher, perhaps already priced into future earnings. After four down sessions in a row the bulls came out in a fighting mood but after midday some heavy sell programs hit the tape hard and stocks fell sharply, but managed to rally hard into the close and come in positive across the board. Look for some window dressing buyers to paint the tape next two sessions.
Breadth was not positive yesterday, interestingly enough. That is because the wide distribution range of price moves on the day, the high volatility and the worries by investors over inflation fears, slowing growth and earnings. Oscillators are still negative but less so, new lows are still pushing new highs and that indicator remains on a sell signal.
Volume trends were lower than the prior day, hence even on an up session the bulls get no credit for an accumulation day. That’s a shame, as we have experienced quite a few days of distribution lately. The early buying on Wednesday could not hold together, and with a drop of about 70 handles intraday it should concern the bulls. If today is a strong up day with volume we could see a turn next week, but volume is needed.
We are counting on Tuesday’s lows to hold firm, let’s call it 5,908 on the SPX 500. Closing above 5950 again was a bonus for the bulls, but sadly that level was penetrated during the day, showing how weak that support is. Nasdaq seems destined to test the 200 day moving average or lower. Industrials has been weak and have lower levels of support to test.
The Internals
What’s it mean?
Not much excitement with the internals yesterday, but they may get moving today as some end of month action is likely. It sure appeared early on we might have a strong day with early positive action but that faded by midday. Ticks were red later in the day, ADSPD closed red and the ADD struggled all session long. VIX was down, then up and clused weaker. Put/calls remains elevated, protection buyers are still out there purchasing puts.
The Dynamite
Economic Data:
- 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:
- 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.
