The Fuse
Equity futures are ripping higher this morning following strong earnings and guidance from mega cap name Apple, along with strong rallies overseas. Today is the last trading day of January and a positive session could put two indices at/near all-time highs (SPX 500 and Industrials). This morning income/spending data along with PCE for December.
Interest Rates are mostly unchanged as the world comes around to a planned pause by the Fed for now. The meeting this past week was uneventful, the markets expected no change in rates but the rise in volatility early in the week stoked some surprisingly big moves. That jolt was enough for volatility sellers to get busy, and that is what we have working now. Fed funds still remain sanguine until the late Spring when a rate cut is expected. Yesterday’s strong GDP for Q4 did nothing to quell those forecasts.
Markets moved up yesterday but a late hiccup due to announced tariffs pushed markets down but like trying to put a ball underwater, it just doesn’t stay down. Stoxx gained in Europe, higher by .3% as France once again led the Euros. The dollar was flat, gold and silver barely up while crude oil is down modestly. US treasury 10 yr yields are up 3bps, German bund yields flat. Japan was slightly higher, China’s markets have been closed all week for holiday.
Earnings from Apple were the highlight last night and they did not disappoint. The stock is lifting higher today and may start filling gaps towards the old highs around $260. We don’t expect to see that level today but certainly over the next few weeks if the market remains strong, Apple should participate. Also very strong move today from Atlassian has that stock on the move, Intel missed but is rising, ‘less than feared’ earnings miss. Visa is also strong, another Dow component. This morning earnings from Abbvie, Exxon and Chevron.
<After strong earnings from Tesla and Meta we saw stocks really make a bullish move following some bad medicine Monday. Without the Fed meeting as a headwind it was all about the data and earnings, with solid GDP, a rate cut by the ECB it was off to the races, but of course the results from those few Mag 7 names were felt the most. Apple with some good numbers last night might help kick off a big end of month rally today.
Really good breadth and it came in the nick of time. We were on the cusp of a sell signal on breadth, fortunately the bulls saved the day and pushed breadth back into bull territory. Given the time of the month there is certainly the chance for this indicator to reach an overbought condition. Oscillators are back up here, new highs are swamping new lows as that indicator remains on a buy signal. .
Good not great turnover but the big names like Tesla, Microsoft and Meta had the lions share of the volume. That was to be expected, but we like to see a broadening out of the turnover so we can see expansion into other groups. We look for better turnover when markets are rising, like the Industrials this week so that we can feel confident price levels are firm and big money is coming in to buy stocks at any price.
Stocks continue to test lower levels successfully. What does that mean? This is a bull market, that’s what it means! Even the small cap Russell 2K managed to sneak out a win, we’ll see if there is some followthrough today, that would be pretty bullish. The Industrials are less than 200 points from an all-time high and just missed it at the highs of Thursday’s session. With strong internals and secondary indicators it seems a foregone conclusion, the best performing index in January.
The Internals
What’s it mean?
A pretty good day for the internals, and frankly the entire market in general. Good volume and strong action in the VOLD, the ADD actually finished strong on the day. VIX slid down but did have a jolt higher end of day but pushed down at the close. Ticks were dominantly green all day, several buy programs hit during the entire session. Put/call raced lower, the breadth indicators now on a buy signal.
The Dynamite
Economic Data:
- Friday:Employment cost index, PCE, income/spending, chicago PMI
Earnings this week:
- 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.
