The Fuse
It’s Leap Day and the markets are not leaping forward. Equity futures are down again at the start as they have been all week long. The poort internals are starting to weigh in on the indices and with little movement higher we could see some down sessions appear soon.
Interest Rates are rising this morning as bonds join stocks in trading to the downside. We have seen the 10 year rising but stalling out at the 200 day moving average, at some point that might give way as yields continue their bullish ways. Note, if long bonds sell off and yields rise the message from the bond market is the Fed is unlikely to act any time soon.
Some chatter overnight that the ECB is preparing to cut rates in the Eurozone as soon as June. That may be in alignment with the Fed. Economic data is big today, the PCE will tell us about inflation in January (a more clear picture), while there are several treasury auctions taking place. Four Fed speakers out today and five more on Friday talking about monetary policy.
Earnings from Dow component Salesforce were out last night and they were pretty good but guidance forward was lacking a spark. The stock has been on a roll recently so a pullback should not be unexpected. Okta posted strong earnings and guidance but Snowflake got totally slammed after guiding the coming year down. They also announced their CEO will be replaced. Duolingo is ripping higher on strong earnings. This am saw strong earnings from Celsius and Best Buy. Tonight we’ll hear from Dell, Zscaler and AutoDesk along with Veeva Systems.
More doji days like today are going to call into question the continuation of this market rally. Holding the lows from Tuesday was an important development, but stocks need to show more momentum or they will simply get sold.
The markets are struggling with breadth recently. There have been few strong breadth days this month, mostly churning of stocks with a few names holding up the indices but most stocks heading down. This is a divergence that can create some major issues for the stock market, as eventually it will begin to matter. If stocks are not going up…they will soon be going down. Fact.
Distribution day for the QQQ and SPY means that a red flag alert is up. There is little doubt the market is teetering here and perhaps the end of the month today is going to mask the weakness. We often see stocks moving higher end of month, but next week starts up March with historically is a tough month for traders.
Markets continue to churn below 5,100, and now the moving averages have caught up. That simply means the MACD and other indicators are going to flatten out, killing the momentum and refusing to show direction. In other words, a sideways market that is rangebound.
The Internals
What’s it mean?
Internals continue to struggle, perhaps were are still trying to burn off the gains from last week or maybe this is something more serious. VOLD reversed yesterday’s gains, the IWM was down hard so that makes sense. TICKS were mostly red on the day, VIX rose up some while the PUT/CALL is on the rise. Internals were not calling the market lower last week but certainly are doing it now.
The Dynamite
Economic Data:
- Thursday:Jobless Claims, PCE January, Pending Home Sames
- Friday:ISM Manufacturing SPX global PMI, Construction Spending, Michigan Sentiment
Earnings this week:
- Thursday:BBY, GDRX, HRL, PZZA, UTZ, HPE, ZS
- Friday:HIBB
Fed Watch:
Fed speakers were out in force this past week emphasizing their view that rate cuts are not coming in a hurry. That may have disappointed the market somewhat, but it is the reality. No doubt the market’s chagrin is going to be felt for weeks as they come more in alignment with the Fed’s forecast. More speakers out this week may give us more information about policy, but for now we have to believe two cuts are about as far as the committee is going in 2024 (down from 2 1/2 cuts). A big slate of Fed speakers this week.
Stocks to Watch
Interest rates – They have slowly been climbing upward as concerns over higher inflation linger. We’ll have some data this week that might dispute the fact.
February Month End – It’s been a pretty positive month for the stock market, getting the year off strong. But perhaps with the next phase of earnings season to come (in March) we may see a bit of a slowdown.
NVIDIA – This was the name last week that everyone moved on, the markets were queued up and ready to fire – the did that. Will there be followthrough? Let’s pay attention here and watch other names in the AI and semiconductor space for answers.
