The Fuse
Equity futures are struggling to get into positive ground on this first day of trading in the new month. The SPX 500 and the Nasdaq both finished strong for the month of February while the Russell 2K really exploded higher for some nice gains and is positive for the year.
Interest Rates are rising up this morning as bond traders continue to sell fixed income. This has been the pattern of late, but yesterday’s strong move down in bonds was bought up quickly as yields went right back down (due to the PCE being in line).
Sentiment in markets is turning a bit more cautious after some positive date released Thursday. Fed speakers came out warning the markets they may be overstepping their bounds a bit in rate cut expectations, but Cleveland Fed President Mester still sees three rate cuts in 2024, but refrained from saying when those will occur.
Earnings from Dell were spectacular, that stock is up sharply this morning (we have this name in the EO portfolio). VEEV posted solid earnings as did AutoDesk but Zscaler missed on their guidance.
Bitcoin is all the rage, rising above 62K as demand from funds continues to flow. Asian stocks rose early as the Nikkei climbed nearly 2%, the yen weakened vs the greenback. China stocks were mixed after a report that saw massive outflows, the largest since October 2023. Euro zone inflation eased less than anticipated supporting those who want to take a slower and more gradual approach to a pivot in monetary policy.
Finally a strong day of breadth and some good action in the Nasdaq for a change. Given the power of the small caps though we could see a followthrough day here on the first trading day of the month. Breadth was good enough to lift the oscillators into positive territory. New highs continue to beat new lows.
An accumulation day for the indices as buyers finally showed up this week to help push the markets up. The last few weeks have seen weakness to start the week followed by some good solid buying to end the week on a high note.
This could be the moment, perhaps a close above 5,100 on the week could be accomplished today. We have been disappointed recently, but the data and earnings seem to reflect bullish optimism about the economy and the stock market. The Nasdaq is firmly above 18K, next level is 19K and then the magic 20K awaits. Support on the SPX 500 remains at 5K.
What’s it mean?
The internals were solid all day long, the VOLD and ADD finishing up while the TICKS were a solid green. Put/calls raced lower as did the VIX, which responded to the inflation news. A followthrough day would go a long way into seeing how the new month is going to go, and frankly without an overbought condition that could certainly be higher. Momentum remains strong.
The Dynamite
Economic Data:
- Friday:ISM Manufacturing SPX global PMI, Construction Spending, Michigan Sentiment
Earnings this week:
- Friday:HIBB
Fed Watch:
Fed speakers were out in force this past week emphasizing their view that rate cuts are not coming in a hurry. That may have disappointed the market somewhat, but it is the reality. No doubt the market’s chagrin is going to be felt for weeks as they come more in alignment with the Fed’s forecast. More speakers out this week may give us more information about policy, but for now we have to believe two cuts are about as far as the committee is going in 2024 (down from 2 1/2 cuts). A big slate of Fed speakers this week.
Stocks to Watch
Interest rates – They have slowly been climbing upward as concerns over higher inflation linger. We’ll have some data this week that might dispute the fact.
February Month End – It’s been a pretty positive month for the stock market, getting the year off strong. But perhaps with the next phase of earnings season to come (in March) we may see a bit of a slowdown.
NVIDIA – This was the name last week that everyone moved on, the markets were queued up and ready to fire – the did that. Will there be followthrough? Let’s pay attention here and watch other names in the AI and semiconductor space for answers.
