The Fuse
It is January jobs Friday and futures are barely moving, awaiting word on job creation and inflation last month. December was a big upside surprise and that might also be the case this morning. Futures are looking to extend their streak to four straight up sessions. The market is looking for about 158K jobs created in January, less than in December.
Interest Rates on the long end of the curve are falling again, the TLT (20 yr etf) is back above 90 per share. Talk this week of President Trump targeting long term rates has put a bid under bonds, and that brings yields downward. Fed futures are still not seeing a potential cut until the summers, some Fed officials are sounding hawkish lately.
Across the pond stocks were slightly higher, the STOXX in Europe gained a paltry .1%, the dollar was flat while traders wait for the January labor report. Gold is higher, pushing up towards $2,900 per ounce one more time, crude oil is also rallying. German 10 yr bund yields are steady as were US 10 yr treasuries. Stocks in Asia were mixed with Japan down .7% while in China the Shanghai index roared higher by 1%, Hong Kong up a robust 1.7%
Earnings last night were a hit parade. First on the docket was Amazon, which beat but guided a bit lighter than expected. The stock ran up into the print so a bit of giveback is not unexpected here. Strong numbers and guidance from Affirm, Cloudflare and Fortinet has these name up sharply along with Doximity, higher by more than 20%.
Solid day for the bulls but with plenty of volatility, and hence large moves. That is what happens when liquidity is poor and the VIX strikes up. But at the end of the day, the buy programs were firing off and a huge rally ensued with some heavy purchases of stock. With the January jobs report looming today it might have leaked out this will be a Fed-friendly report.
Breadth was not on the positive side but that’s okay, after a few sessions of gains and then Monday’s rotten figures we could use a bit of rest. But what is nice for the bulls is a ‘rest’ in breadth as the market rises. Some would call that a negative divergence but I would not, after all the price action matters more. The breadth IS important but is there to support/defend or define the trend. So far it is up.
Bullish SPY and IWM action gave these two ETF’s an accumulation day, but it was a struggle to get there. Nasdaq was up but surprisingly on lower turnover. Since January we have had a problem with liquidity, the result of lean money flows into banks. Perhaps that will change but as we have seen in the VOLD (see below) the money flows have been challenging. It is not unusual to see volume wane up near all-time highs, the wall of worry is being created and will be something for the bulls down the road (a positive).
Markets continue to extend themselves away from support. At some point the sellers will have the advantage, but with the recent volatility (those last two Mondays) the markets have had the opportunity to test lower support. In these two cases they likely went below and as such the dip buyers could step in without too much risk of losing. Support still at the 20 ma for most indices.
The Internals
What’s it mean?
I’m going to grade the internals with a C+, only fair. VOLD and ADD were clearly lacking in energy until some buy programs showed up late in the day. That is evident by the strong ticks over the last 35 minutes of the trading session. VIX fell again and is now confirmed bullish, below. the 200 day MA for the second straight day. There were some heavy sell programs midday, but those were contained. Put/calls remain under pressure, that is bullish, too. Jobs report Friday, we’ll see how the internals respond.
The Dynamite
Economic Data:
- Friday:Jobs report, Bowman speaks, wholesale inventories, consumer sentiment and credit
Earnings this week:
- 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.
