The Fuse
Equity futures are down sharply, losing yesterday’s strong gains as big tech names disappointed on their earnings/guidance. Top of the list is Google, which is sharply lower on heavy volume after offering mixed guidance. Disney came in with a nice beat and raise. Bulls are looking for a turnaround today but it may be difficult to see buyers step in before the important jobs report Friday.
Interest Rates are down this morning on the long end of the curve as bond buyers come back in to pick up fixed income. We have not seen too much rhythm buying though, in fact the bond market has been up one day down the next for weeks. If this seesaw action continues for much longer we can see bond buyers stepping away. Fed futures now pricing in June as the earliest time for a rate cut, but more likely July.
Stocks are weak after some poor earnings last night have driven buyers away for now. Stocks are on the defensive here, liquidity is poor and that is causing some erratic price movements. In Europe STOXX was flat, Germany and France were lower. The dollar fell .1%, gold is higher by .7% as is silver, crude oil down more than 1%. German 10 yr bund yields were lower by 3bps, US treasury yields down 1bp, Stocks in Japan were slightly higher, Hong Kong and Shanghai both fell.
Earnings last night from Google were seen as a disappointment though the stock had been running up into the print, closing at an all-time high. CapEx spending levels remain elevated so that means Google is very pleased with their position. A downbeat quarter from AMD, Chipotle, Amgen and SNAP have those stocks sporting losses this morning. Disney and Uber reported early and are moving in the opposite direction.
After the heavy selling that pushed markets lower on Sunday night it might have been hard to imagine stocks would rise up and actually show a positive for the first couple of sessions this week. But that is what we have here, with good internals, breadth (finally) and price action that is lifting the indices near all time highs. And yes, even the small caps participated in the Tuesday rally – will wonders ever cease?
Breadth turned around nicely yesterday as the bulls said ‘that is enough!’. Certainly the recent trends have been pointing towards lower prices, liquidity has been poor and that means we could find ourselves staring at some erratic price action. But, the oscillators lifted back above the zero line yesterday, so perhaps they are back on buy signals. A confirmation would be ideal. New highs are crushing new lows again, that indicator remains on a buy signal.
Volume levels were suspiciously low. Perhaps the high level of selling Monday then buying later in the day was big enough for distribution, but clearly the commitment to buying was lacking by the closing bell.
We like to see heavy turnover on strong days like Tuesday, but that was not the case. It leaves the market vulnerable to downside if liquidity is not buoyant.
Perhaps the lows tagged on Monday were ‘it’ for now. Those levels are important, let’s call it 5923 on the SPX 500 and 21K on the Nasdaq. If those levels hold for another couple of days we may have a launch to new highs. There is better support at the 100 day moving averages, not far below those spots. Any correction of size/time could tag those lower levels quickly.
The Internals
What’s it mean?
Thank goodness for a turnaround Tuesday! The internals were strong from the opening and while some faltered a bit make no mistake, the bulls won the day. Look at the strength in the VOLD, we are hoping this is not a one hit wonder, the TICKS just dominated by the bulls, VIX fell sharply as did the put/calls. If there is a good followthrough day we are looking at some new highs coming very soon.
The Dynamite
Economic Data:
- Tuesday:JOLTS, factory orders, Fedspeak
- Wednesday:ADP, trade deficit, SPX PMI, ISM services, Fed speak
- Thursday:Jobless claims, productivity, Waller and Logan speak
- Friday:Jobs report, Bowman speaks, wholesale inventories, consumer sentiment and credit
Earnings this week:
- Tuesday:PYPL, SPOT, PFE, REGN, RACE, MRK, EL, APO, AMD, GOOGL, SNAP, CMG, ENPY AMGN, EA, PRU
- Wednesday:UBER, DIS, TM, BSX, JCI, F, QCOM, ARM, AMSC, VKTX, ORLY, ALGN, AFL
- Thursday:LLY, RBLX, COP, PTON, HSY, BMY, TPR, YUM, POWL, PINS, FTNT, AFRM, AMZN, ELF, NET
- Friday:CBOE, NWL, KIM, FLO
Fed Watch:
After last week’s Fed meeting we have a slew of speakers set to talk it up. This coming week is big for data, including the January jobs report. The committee’s decision to sit on rates for the first time since last July at this point was telegraphed, and the next meeting in March is likely to be the same conclusion. The data is going to guide them toward policy, right now it is in pause mode.
Stocks to Watch
Jobs Data – After December’s surprisingly good report the consensus is for something a bit less. Chair Powell and the committee seem pleased with the employment situation, 4.1% unemployment is a good place the for economy to continue growing.
Big Tech Earnings – We will hear from Amazon and Google this week among a smattering of other names in various sectors. Earnings have by and large been pretty strong this season with solid guidance. Let’s see if that continues.
Tariff Response – Tariffs are suddenly on the table, whether for real or a threat. Twice this week the stock market reacted negatively to the news, volatility rose up and pushed markets down for a time.
That has to be worrisome to the bulls but opportunistic to everyone.
