The Fuse
Equity futures are rallying smartly this morning, rising up about 1% or so after starting off the week in the hole. Perhaps a nice bid after some down sessions is just what the bulls need to recover and step in with some dip buying. CPI today is going to be the key report today.
Interest Rates are slightly higher as the fixed income market awaits inflation figures for February. During the month prices in the ISM kept rising, wages were up as well so we could see hotter inflation, though retail sales in January was weak. Fed futures still see a much bigger rate cut coming, 3 1/2 by end of year.
Stocks are higher this am with a nice burst overnight in anticipation of a weak CPI number (that was the case). The STOXX in Europe gained .6% paced by strong gains in France and Germany. The dollar rose up .2%. Crude oil is up smartly, more than 1.5% while gold and silver are up modestly. German 10 yr bund yields climbed by 2bps, the 10 yr US treasury yield is down by 1bp. Stocks in Japan were barely higher, Hong Kong down .8% while Shanghai down a bit.
Earnings were sparse last night but today we’ll hear from Adobe, American Eagle and Sentinel One, tomorrow Dollar General.
More downside Tuesday as there is no end in sight to the selling. Markets fell well below Monday’s low and with some heavy turnover. At some point the selling is going to stop but for now there is no light at the end of the tunnel. Each day has some news related to tariffs or new policy agenda items that seems to knock the markets for a loop. No question the worry on everyone’s mind is a slowing down of the economy that could push towards a recession.
Following up the worst trading day of the year with another down session was not what the bulls ordered. Clearly this is bear market action and the longer it continues the worse of people will feel. Breadth again was poor though not as bad as Monday. I’m not sure if that is considered a positive. New lows are dominating new highs and the oscillator remains negative.
More downside volume again today as big holders shed their stocks once again. Liquidity remains challenged, too. The stock market is just not ready to move up, the indices are all down sharply in 2025. Volume trends are bearish as can be and if that continues for a bit longer it is going to be difficult to find buyers who add on dips. So far they are nowhere to be found.
More bearish activity yesterday but the indices did not close on the lows. That is a positive (I guess), but with the Industrials looking to break 40K and the Nasdaq already below 20K there are lower support areas to probe. The SPX 500 has good support at 5,400 but below there is about 5,120 or so, a level nobody really wants to visit.
The Internals
What’s it mean?
More ugliness on those internals, though not as bad as Monday. VOLD did barely finish green as did ADD, a victory of sorts. VIX climbed again but off the highs of the session. TICKS were mostly red but there was a smattering of green too, put/calls continue to climb and are on a sell signal. Bad times for the market here. but we’ll see if there is improvement later in the week after the inflation reports.
The Dynamite
Economic Data:
- Wednesday:CPI, federal budget
- Thursday:PPI, jobless claims
- Friday:consumer sentiment
Earnings this week:
- Wednesday:ZIM, ARCO, IRBT, MX, AMRN, CXM. ADBE, S, CCI, AEO, TLYS
- Thursday:DG, WB, QBTS, BLDP, VFF, DOCU, ULTA, SMTC, PTMN, RBRK, SOL
- Friday:GOGO, HSON, AIRS, LI
Fed Watch:
No fed speak this week but the committee will be watching the inflation readings closely. Recall the recent miss in PCE, the reading the Fed pays very close attention to. Further, it seems job growth is strong enough to handle the current 4.25% fed funds rate for some time, that will discourage many who are looking for cuts in 2025. It just doesn’t seem in the cards this year.
Stocks to Watch
Volatility – The VIX rose up sharply and remains stubbornly high. There is the notion that high volatility readings can continue until a very large selloff happens. That is likely the case, and the longer we go without it the more pain will be delivered.
Mag 7 – This group of mega tech names has been very weak since the start if February. Can they turn it around? The correction in this group has been deep but so far buyers are not sniffing around just yet.
Inflation – More critical data with the release of the CPI and PPI for February. These numbers have been relatively hot and showing much stickier inflation than ever, so we continue to wait for more inflation of prices dropping.
