The Fuse
Equity futures are getting blasted this morning after a major reversal on Wednesday, but this is a function of higher volatility, hence a wider range that is created from a great deal of uncertainty.
Interest Rates are higher again today as bond holder start selling off their long holdings. No question rates are still high but that is likely due to worries about inflation being too sticky. We’ll know more next week. Fed futures are using these stock market selloffs to price in cuts, but the Fed is likely not going to agree with that assertion.
Stocks are getting zapped this morning as a 1% selloff in the pre-market takes place. Europe gained some more ground though, up .3% in STOXX paced by strong gains in Germany and France. The US dollar fell .2%, gold is down .5% as is crude oil. German 10 yr bund yields rose up 8 bps giving back ground from yesterday, 10 yr treasury US bond yields rose 4bps. IN China Hong Kong ripped higher again, up 3.3% with Shanghai up 1.2%, Japan up .8%.
Earnings from Veeva were outstanding, the stock rallying on the news. Not so good for Marvell which gave in line guidance. Zscaler also gave strong earnings and guidance, but not MongoDB. Costco reports tonight along with Broadcom and The Gap.
Well, it certainly seemed as if the bears were going to bring the market again to its knees. An early rally faded quickly and suddenly every bull in the market was chased away as if the market had some sort of virus. But some tariff news stifled the bears a bit and suddenly heavy buy programs hit, just like it was meant to be! (sarcasm). Regardless, the bulls had the upper hand and managed to pull out a win, first time in over a week. The trend is still down, but a relief rally feels good.
The breadth was horrible for most of the day until this indicator hit rock bottom, suddenly the A/D line started to improve. We show the final reading as better than 2-1 positive, but no question a big 1% rally should offer better statistics. Oscillators are still mildly oversold, new lows are still topping new highs, that indicator is on a sell signal.
Some heavy volume prints at the turn today make this one bottom actually workable. While we don’t scour the markets for bottoms, we prefer to play the trend. Yet, when markets are as oversold as they are eventually that ominous music stops and buyers step in with some purpose. Clearly we’ll have better turnover later in the week as the jobs report and Chair Powell’s message about the economy are unraveled.
Another probe lower by the SPX 500 and Nasdaq may have been enough to call a bottom, though we won’t declare victory over the bears just yet.
The SPX 500 nearly tagged the 200 day moving average, was close good enough? Nasdaq plunged below it Tuesday and tagged it yesterday, if there are a few more up sessions in a row we may see the SPX 500 make a run to the 20 ma, but that would be about 200 points and falling.
The Internals
What’s it mean?
A solid comeback for the bulls with very strong internals, not nearly as bearish as Tuesday with the herky jerky motions, but some solid gains to the upside. VOLD and ADD were leading the way, but so were the ticks, which were green most of the session. Put/calls continued to move lower, VIX rose up but finished well off the highs of the day and is now on a short term buy signal. Followthrough. That is the key.
The Dynamite
Economic Data:
- Thursday:Jobless claims, Q4 productivity, trade deficit, inventories, fed speak
- Friday:January labor report, wagers, consumer credit, lots of fed speak
Earnings this week:
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.
