The Fuse
Stock futures are pulling back slightly after a couple of strong days of gains. With not much to move markets a bit of profit-taking is in order, and since this is Friday not many want to be long over the weekend with headline risk out there.
Interest Rates are dropping as fixed income buyers step in to pick up bargain prices. Bonds have been beaten up this week as the 10 yr moved above the 4.2% threshold on Tuesday. There is little to dispute the rise in yield as worries over inflation continue. High yield spreads remain tight though, economic data is strong and there is no recession on the horizon. 2’s are steady, fed funds futures not seeing a cut coming until June, maybe April.
Stocks look to be lower today and in Europe that was the case, the STOXX falling .1%, declines in France and Germany. The FTSE though added .2%. The dollar climbed .1%, gold hit a new high as did silver which is nearly $100 per ounce. Crude oil up sharply, too. Stocks in Asia were highs, Japan up by .3%, Shanghai the same and Hong Kong up .4%>. US 10 yr treasury yields falling a bit, down 1bp and German bund yields flat.
Earnings last night from Intel were good but their guidance was punk, and the stock is getting belted today. Capital One had strong numbers but weaker guidance as well, CSX delivered a strong number. This morning solid earnings and guidance from SLB and Ericcson.
That was a nice followthrough day for the indices, and now the bulls have some control. I only say ‘some’ because the statistics were not exceptional. Breadth was good but barely (more on that below). Stocks are in a good spot to keep moving upward if there is a lack of ‘scary’ type news. Economic data continues to pour in and is very positive.
Decent breadth but not something you would shout from the rooftops. No question the bulls are back in charge after a one day respite, but the oscillators need to make a strong move up. So far they are positive thanks to a strong Wednesday. New highs are beating new lows, keeping this indicator on a strong buy signal.
Volume levels stalled out badly and while the indices were up on the day, it was not met with conviction. That’s fine for now, perhaps a tight consolidation before some more quality rallies on higher turnover are ahead. A few more days to at least stay ‘up here’ with no heavy distribution would be very bullish.
We’ll put a notch in the win column for the bulls. That was a nice day for the bulls with a good expansion of many sector groups. The rotation is on, but even tech stocks got their fair share of support. Fridays have been hit/miss, but with only a week left in January trading and earnings season in full swing there are some opportunities.
The Internals
What’s it mean?
I’m going to say this was a moderate win, nothing dominant. The VOLD finished strong, and the VIX ended near session lows. Ticks were mostly green but there were some sell programs hitting during the day. Where there is trouble is the ADD and ADSPD, which finished at the lows of the day. That could be a problem down the road if breadth weakens.
The Dynamite
Economic Data:
- Friday:Consumer sentiment, SPX flash services/manufacturing PMI
Earnings this week:
- Friday:SLB, ERIC, BHA, CMA
Fed Watch:
Plenty of fedspeak last week, pretty consistent with their views. We won’t hear anything this coming week as they are now in the ‘blackout’ period, the next fed meeting starts in a week. Fed futures not seeing a cut or hike happening at this next meeting, policy likely to be steady.
Stocks to Watch
Oil – Plenty of news surrounding oil and reserves, with Venezuela and Iran on the front burners. It appears likely that crude is on the upswing, perhaps to $65 or so and then higher if supply is disrupted.
Bitcoin – the big crypto currency has been on a roll since the start of the year and is trying to make another run at 100K. Speculators have been frustrated for the last few months as crypto currencies just don’t want to break out. Eventually it will happen.
Dow Industrials – Some big names this week but not tech-related. We’ll have MMM, JNJ, PG delivering earnings, it’ll be interesting to see how the ‘other side’ is living.
