The Fuse
Equity futures are mixed this morning as the Nasdaq and SPX 500 try to bounce back from Monday’s pasting. Today starts the two-day fed meeting which is largely expected to result in no move by the committee.
Interest Rates are up modestly this morning as the Fed meeting begins. Some are probably squaring positions before the Fed meeting gets underway. Yields remain elevated but the market is adjusting to the ‘new normal’ of higher short term rates. Fed futures see no change in policy at the conclusion of tomorrow’s meeting.
As news spread over some AI turnover stocks did manage to gain a bit of ground overseas. In Europe the STOXX was higher by .2%, led by the German DAX. The dollar rose sharply too, German 10 yr bund yields up 1bp, 10 yr US treasuries up 2bps. In Asia, Japan was slammed, down 1.4%, Hong Kong up .1%.
Earnings this morning were strong from RTX and GM, both stocks moving on those numbers and guidance. LMT came in a bit shy on revenue guidance. RCL also posted strong numbers. Tonight we’ll hear from F5, Starbucks, SAP, Logitech and Stryker. Tomorrow am ASML, ADP, TEVA, Nasdaq and VFC.
The markets were behind the eight-ball from the start as a 1-2 punch to the gut hit the indices before the open. Seems a competitor to AI chips (DEEPSEEK) is making companies worry, while tariffs were threatened to Columbia and then pulled off the table. At one point overnight futures were down nearly 4%, a monster move down but did manage to recover. In fact, the ES futures and Nasdaq finished well off their lows of the day, The Industrials posting a fairly large-sized gain.
On a day when the Nasdaq was blasted along with the SPX 500, breadth was positive. A surprise, especially with the Russell 2k down about 1%. There were some pockets of strength certainly not in the tech area. Oscillators were expected to fall, they did on the Nasdaq but not on the NYSE. Given the rout in the market and the potential for turnaround Tuesday, markets could turn back up on a dime.
Pretty heavy turnover early in the day with the heavy selling, stop running and gap lower. Stocks tried valiantly to recover but just could not make it happen, save for the Industrials. This day will go down as a distribution day, something we have not seen much of in January. As we have a Fed meeting starting today and concluding on Wednesday, it’ll be interesting to see if bargain hunters show up with the heavy artillery. If so, the short covering could be quite large.
As of last week the SPX 500 had left a few gaps in the chart to the upside, now there is a massive hole remaining to the downside. All in a days work when volatility is king. The VIX sent investors and traders scrambling, but in the end the SPX 500 held the 50 day moving average, the Industrials with a monster outside day while the IWM clings to support at the 20 and 100 day moving averages.
The Internals
What’s it mean?
Odd behavior with the internals on Monday. Certainly we would believe they would be atrocious considering the magnitude of the losses, before and after the opening. But the ADD finished up, the VIX off its highs of the day and the Nasdaq TICKS were very red, but the NYSE ticks were about even, leaning towards green. ADSPD was up but not quite a trend day, Put/calls up but not spiking. So, it is hard to say the internals were to blame, but might be set up for a big reversal this week.
The Dynamite
Economic Data:
- Tuesday:Durable Goods, Home Price Index, Consumer Confidence
- Wednesday:Retail/Wholesale inventories, trade balance, FOMC rate decision, Powell press conference
- Thursday:GDP first look Q4, jobless claims, pending home sales
- Friday:Employment cost index, PCE, income/spending, chicago PMI
Earnings this week:
- Tuesday:BA, GM, RTX, SFY, JBLU, KMB, SYY, SBUX, SAP, LOGI, CH, FFIV, SYK
- Wednesday:ASML, TMUS, ADP, DHR, TEVA, GD, VFC, NDAQ, TSLA, META, IBM, MSFT, LRCX, NOW, CLS, WDC
- Thursday:UPS, MA, DOW, NOK, LUV, CAT, CMCSA, MBLY, AAPL, INTC,V, KLAC, TEAM, BKR, DECK
- Friday:XOM, CVX, ABBV, CL, PSX, CHTR
Fed Watch:
The first fed meeting of the year with four new voting members this week. Fed funds futures are predicting a pause this time around and for the next meeting, but the May session might be the one where a cut is announced. Regardless, it will be important to listen to the press conference closely for clues on future monetary policy. As always, the data matter most here.
Stocks to Watch
Interest Rates – The first fed meeting of the year is this week, also the first one after a change over in the Administration. Chair Powell is locked in and focused on how to manage monetary policy, and with recent strength in jobs, manufacturing and pricing pressures it seems the committee is ready for a rather long pause. We’ll know more after the press conference Wednesday.
Mag 7 Names – It’s a big week for the Mag 7 as four of these names will report during the latter portion of the week. Is Tesla overdone? Will Microsoft and Meta push their AI initiatives even further? We’ll know more this week, and of course Apple on Thursday evening.
GDP – The first look GDP for Q4 is out Thursday morning after the Fed decision but the committee has a good read on growth. The Atlanta fed GDPNow says we grew about 3% in the quarter, we’ll have to see how much was driven by inflation. Employment cost and PCE Friday will be important to watch, too.
