The Fuse
Equity futures are getting pasted again this morning in a continuation of Monday’s sharp reversal down. Testing the lows from Monday seems likely this morning as tariffs take effect. Jobs report later in the week are going to be a major concern, Chair Powell speaks as well on Friday.
Interest Rates are down a bit on the long end of the curve but the safety trade has not returned. An interesting development, fed futuresd are now pricing in three cuts by the end of the year, perhaps seeing enough weakness in the economy for the Fed to blink.
Stocks were massacred yesterday on higher turnover. No question the market has entered into a corrective phase, but most seem to be oblivious until it seems to matter. The push down below strong support was easily accomplished, which tells us there is no support for awhile. After Friday’s rally the stock market is only mildly oversold, and that is no reason to start buying but selling on rallies is essential.
Earnings last night from Okta were outstanding, the company announced strong guidance. Mixed results from Gitlab. This morning beats by Target and Best Buy but caution going forward. ON holdings had a nice beat and raise. Tonight we hear from Credo, CrowdStrike, Nordstrom, Box and Ross Stores. Tomorrow we have Abercromie, Foot Locker, Brown Forman.
So much for Friday’s nice rally. Stocks were punished all day even as it appeared we might get a nice followthrough rally. That indication was early on but from the opening bell the sellers took control, and at the lowest point of the day the SPX 500 had nearly fallen to 5,800. A late session rally clipped some of those gains but damage continues to be felt each day, yes even on Friday before the rally.
We had good breadth statistics early in the day but they eroded fast, and at the closing bell it was a rout. Better than 2-1 negative on the session and there was plenty of blame to pass around. Starting with tech, which got obliterated all session long as the Nasdaq is now just clinging to 20K. Oscillators went even deeper into negative territory but the huge difference being more new lows than new highs. This is still a bearish indicator.
Brisk turnover again Monday but not a distribution day, but certainly much higher levels than the 50 day moving average. This still means big money is leaving the building. Stocks have been under a great deal of pressure since the end of January and there seems to be no let up. As we continue through a seasonally weak period for stocks we notice sentiment has been shifting bearish, too. If that continues we could have a much bigger correction on our hands.
Well, it is now just a matter of when not if. The SPX 500 is within earshot of the 200 day moving average, the Nasdaq 100 even closer. Those two markers act like a magnet, and eventually price will come to meet them. At that time it will be a decision point, stocks are going to head lower if big buyers are not aggressive. Industrials look awful here but are furthest away from its 200 ma.
The Internals
What’s it mean?
It was all about the news releases, the stock market did not take too kindly to what was being said about tariffs. A hearty serving of sell programs hit hard, especially late in the day. Check out the TICKS, simply red all session. VOLD slipped hard as did the ADD, ADSPD was down sharply, the VIX higher but closed off the highs of the session. A very bearish day.
The Dynamite
Economic Data:
- Tuesday:Fed speak
- Wednesday:ADP, S&P global services final, factory orders, ISM services, Beige book
- Thursday:Jobless claims, Q4 productivity, trade deficit, inventories, fed speak
- Friday:January labor report, wagers, consumer credit, lots of fed speak
Earnings this week:
- Tuesday:TGT, BBY, SE, ONON, CRWD, CRDO, STEM, JWN, BOX, ROST, CHPT
- Wednesday:ANF, FL, THO, SSYS, RSKD, EDIT, BR.B, MRVL, RGTI, ZS, MDB, VEEV, VSCO, TREE
- Thursday:JD, CBRL, KR, BJ, DCTH, HIPO, M, AVGO, BBAI, COST, GAP, HPC,IOT, COO, VEL, SERV
- Friday:GCO, AGN, INTT, BDX, ONLY
Fed Watch:
Last week’s data was shockingly poor, but at some point the economy is going to need to cool down. Most fed speakers last week talked about the cautionary tale of high inflation on the economy, they are in no rush to pour gasoline on the fire. We’ll hear more this week of the same, the next fed meeting is likely to be met with no change in policy, but further meetings dictate this, too.
Stocks to Watch
Retail – A heavy week of earnings from retail names, not the biggest ones like last week but more concentrated in niche areas. We saw a bit of weakness in the consumer reports last week and the prior week (spending, retail sales) so it would not surprise us to see a few misses, but it’s all about the guidance.
Costco and Target will lead the way.
VIX – Market volatility has been rising up lately due to some increased uncertainties. When there is worry about the future that is when volatility rises, ranges expand and option premiums rise. If we experience a steady down move in volatility we will know the trend up has continued.
Mag 7- The last of this group delivered earnings last week (NVIDIA) and no surprise the ‘7’ are relatively poor performers. But, with a new month starting perhaps money flows will start to return to this group.
