Equity futures are all over the map this morning. Volatility is certainly elevated in front of the big Fed meeting this week. Overnight futures rose up 30 handles but then plunged 70 handles from there to break 3900 on the SPX futures, but have rallied. back to the flat line.
With a pretty wide trading range here (4200 to 3800) we see the markets on the lower end of that range. News will be important later in the week as we find out where Fed policy is at. The Russell 2K has fallen sharply this month and continues to make a run to the December lows (IWM at 171). At this point, pretty well oversold but that does not mean buy. Banks are still struggling and with a heavy weighting in the R2K, that index remains under pressure.
Credit Suisse was put out of its misery this weekend, agreeing to be bought at fire sale price. UBS picked off this bank in a massive take under.
FedEx posted stellar earnings last week and rewarded investors. We are in the slowest period of earnings season, but we do have a few big names reporting later in the week.
The big event this week is the Fed meeting and their projections will be released. We’ll also keep a close eye on the banking situation and if there is some resolution to the crisis.
Breadth was atrocious on Friday, as bad at 7-1 negative at one point, but finished 6-1 to the downside. This indicator is back on a sell signal, and leading into the end of the quarter there could be some continuation of this poor breadth to get stocks off investors’ screens.
Volume was higher Friday due to the options expiration day. Friday was triple witching, and that caused many options to exercise. Bank stocks showed heavy volume all session long and to the downside. We should see a pause in turnover early in the week and then some acceleration after the Fed meets.
We continue to see 3800 on the SPX 500 as good support, below there is 3762. This past week the low was 3810 and that held firm, but Friday’s poor session means there could be much more down if Monday has some followthrough. The Russell 2K has been very weak of late, about to break the December lows (which the Dow Industrials already did).
What’s it mean?
Friday was a down session from the start. As we have noted, the lack of following through to the upside is becoming a problem for the bulls. The VOLD shows a straight down picture (top left), while ADSPD was down all session for a trend down day. It was an expiration day so markets were volatile (VIX top, second from the right) but fear is starting to show up in other places, with bond yields dropping over bank worries.
- Monday:Existing Home Sales
- Tuesday:FOMC meeting starts, mortgage apps
- Wednesday: FOMC decision on rates
- Thursday:Jobless Claims, new home sales
- Friday:Durable Goods, Global Flash PMI
Earnings this week:
- Monday: COUP, FL
- Tuesday: NKE, CSIQ, HUYA, GME
- Wednesday: WOOF, CHWY, WGO, OLLI, SHOE, KBH
- Thursday: ACN, GIS, DRI
- Friday: XPRS
Fed Watch: It’s the second meeting of 2023 and plenty to discuss around the table. Will the FOMC consider the banking issues a systemic problem and pause on rate hikes, or will they continue to fight inflation with impunity? Markets are waiting for it and the projections for the year, too.
Stocks to Watch
Nike – big retailer reports earnings this week, looking at China outlook (which was better last quarter).
Federal Reserve – committee will talk about inflation and their objectives over the coming year.
FRC and other banks – This name seems to be in trouble, the market is telling us this. Other financial institutions are on watch.