The Fuse
Equity futures are lower this morning after a violent overnight session. Stocks were down more than 1% at one point as big moves in gold and silver rocked commodity traders in the wee hours of the morning. Expect more wild action on this last trading day of January.
As the Fed kept rates in check this week short term rates are not really on the move. However, inflation is still a problem and the Fed Chair stated as much. 10 yr yields are moving up, as are 2’s and 5’s. High yield spreads are still tight, fed futures not seeing a cut happening until June.
Stocks were on a wild ride but in Europe did finish higher. The STOXX were up .2% led by increases in France and Germany. The FTSE was flat, US dollar climbed .3%, gold and silver were crazy overnight, at one time down about 9% but now only down about 6% each. Crude oil slightly lower. US treasury yields were up 3bps, in Japan the Nikkei was off .1%, Hong Kong and Shanghai down sharply (2.1% and 1% respectively).
Earnings from Apple were stellar, the stock rallied smartly after the release but is slightly lower this morning. Sandisk is a big winner, rallying strong after posting robust earnings and guidance. Western Digital also very strong earnings.
Stocks hit a speed bump yesterday and really got plowed over just after the open. But the bulls came back to rally the markets to a smaller loss, and even breadth turned positive. At one point the Nasdaq was down more than 2% on heavy volume, one could blame Microsoft for the trouble but it was widespread selling as volatility rose up. A sign of things to come.
Positive breadth on a day like yesterday sends a strong signal that things might be okay. However, that spread was not convincing enough to believe the worst of it is over, The market needs a calmer situation to straighten out. Oscillators remain positive and new highs still working higher.
Heavy turnover was expected later in the week and yesterday saw a big surge in volume. Today being the last trading day of the month and with so much uncertainty and concern in the marketplace no question some profit-taking will happen. Small caps their best month in years, expect some selling here today or into next week regardless of the condition.
A good move down in the indices but give them credit, they managed to rally back from steep losses. Was that enough to be considered a successful test? Not yet, as we would like to see a followthrough day. Now, yesterday’s very wide range is likely going to hold the markets today, but if the VIX can move lower there is a chance to get the bulls engaged once again.
The Internals
What’s it mean?
Given the heavy move down by the indices just after the start of trading, the internals made a bottom and turned around, but it is not all positive. VOLD and ADD did finish at their highs, probably some good short covering after traders realized the VIX had made its highs of the day. Put/calls rose up, and that is a concern, TICKS were evenly distributed so buy/sell programs all day.
The Dynamite
Economic Data:
- Friday:PPI (dec), chicago biz barometer, Miki Bowman, Alberto Musalem (fedspeak)
Earnings this week:
- Friday:SOFI, AXP, VZ, CNI, CVX, XOM,, CHTR, LYB, ALV, APD
Fed Watch:
The first fed meeting of the year is upon us and most likely the committee will punt on a rate move. Monetary policy looks to be stable right now, perhaps a cut may be out in the future but for now with a strong economy, job growth happening and some elevated inflation the FOMC is not likely to budge. The market is also in alignment with this thinking.
Stocks to Watch
Tesla – All eyes on Elon Musk this week as many are looking for some new announcements on product development. This is the first quarter the CEO has been focused on the company full-time in a year, perhaps that did some good. Robotics, full service driving metrics should be interesting to read about. The stock has been strong for the past few months.
Apple – All the worry warts are out on Apple this time around, but no question the company had a good holiday period. They often offer soft guidance for the current quarter we are in so that should come as no surprise. The audience is interested in hearing about their AI ambitions and association with Alphabet.
Small cap Stocks – This group has been on fire this year, rising some 9% so far in 2026 but that pace won’t last. IWM is often the driver of the rest of the market, if they sell down we’ll see if that is still the case.
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