The Fuse
Much like yesterday equity futures are starting lower as the market continues to take a risk off approach following last week’s ‘less than dovish’ Fed statement. The futures market is now barely pricing in a cut at the next meeting in March. Stocks are mildly oversold here based on the oscillators turning negative.
Interest Rates are slightly higher after jumping up the past couple of sessions. Higher rates are a poison for small cap stocks, which have been hit hard recently. Money flows are still strong though and if rates start to dip we may see this group start to perform. Mortgage rates hit 7% for the first time in a while.
As stocks are modestly lower in the US in the pre-market over in Europe we saw the Stoxx 600 gain about .5%. Stocks in Asia were mixed, Japan was down .5% but Shanghai and Hong Kong were up very strong, 3.2% and 4% respectively. Crude oil is higher by .7% while gold is mostly flat, silver down modestly.
Earnings last night from Palantir were strong but guidance less than expected, but the stock is up strong. Lilly reported robust numbers this morning and is up more than 4%. Spotify is shooting higher as well
Stocks fell moderately, dragged lower by higher interest rates again. The Russell 2K was the culprit, pulling down other equities. The small index dropped sharply, more than 1.25% on the day after finishing poorly on Friday. So we have a followthrough day to the downside for small caps, but the large cap names continue to do comparably well. We’ll see if the bulls can re-capture the trend later in the week.
Another day of poor breadth as the Russell 2K knee-capped the rest of the market. The oscillators remain negative too, that could be rehabilitated later in the week with some upside in this index. However, volatility is starting to get warm here and if we look under the hood the broader market is not participating.
Heavy selling in the Dow Industrials (DIA) gave that index a distribution day. This is the result of professional selling, and while one day does not matter, several of them in a row could be trouble. We’ve already racked up a few of these in the IWM and it tends to spill over to the rest of the market, eventually. Markets trending up need participation from all groups and sizes.
Wednesday’s support at 4,850 is still a good reference point. Stocks are not overbought here but are approaching that condition, meanwhile the SPX 500 still has 5k in its sights. That mark could fall easily this week with the goal sitting about 1% above current levels. There will be celebration but also a sell the news effect, too.
What’s it mean?
That was a wasted day by the bulls. Nothing really special here as the VOLD was tanking hard all day long, the VIX did decline while ticks were spread out. Notice in the TICK/Q the buy programs (green) petered out, while the red ticks increased all session long. It’s the ‘story within the story’. ADD was down all session as well. Let’s see if the dip buyers come back this week.
The Dynamite
Economic Data:
- Tuesday: Eurozone Retail sales
- Wednesday: Mortgage apps, crude oil inventories, consumer credit
- Thursday:jobless claims, WASDE
- Friday:
Earnings this week:
- Tuesday: AGCO, CHKP, CMI, DD, LLY, LIN, SPOT, AMGN, CAVA, CMG, CRUS, ELF F, FTNT SNAP, YUMC
- Wednesday:BABA, CVS, HLT, SLAB, YUM, XPO, ARM, COTY, PYPL, DIS
- Thursday:WMS, CYBR, HSY, K, MAS, RL, SWI, AFRM, NET, SYNA TTWO, TEX
- Friday:AMC, ROAD, PEP, SXT
Fed Watch:
Nothing much this week but Chair Powell is interviewed on 60 Minutes for Sunday evening. This past week saw the committee stand pat on monetary policy but they are contemplating the right timing for rate cuts. That is likely to come this year but not as soon as the market would like. The data shows inflation is still too high and the economy is running strong. Not an environment that needs rate cuts.
Stocks to Watch
Volatility – The VIX remains low under 14%, a dangerous level as a pop in volatility can occur at anytime, unexpected. You might recall some years ago just after Chair Powell took over there was a massive move higher in volatility, it was the month of February. Something to watch for.
Earnings – A deluge of earnings this week as we get a sampling across several areas including retail, industrial, technology, healthcare and entertainment. Disney, McDonalds, Lilly and Pepsi will be in focus.
Interest Rates – Following Friday’s huge labor report which showed more than 330K jobs created, interest rates popped higher as the market starts to price in fewer rate cuts down the road, as this was telegraphed Wednesday by Fed Chair Powell.