The markets began the new week with a bearish tone but it could have been much worse if not for the tech titans as the parabolic rise in NVDA continues to find willing buyers.  With Fed members disappointing the market expectations for a first-quarter rate cut bond yields rose rather sharply adding to uncertainty.  Today investors will focus on the slew of reports and, we will hear from several Fed members out from under the blackout restrictions.  With so much data coming our way plan for challenging price action with whipsaws and big point moves possible.

While we slept Asian markets closed mixed with China and Hong Kong surging as CCP steps up stimulus activities hoping to stem selling triggered by the real estate and manufacturing declines. European markets, unclear about the interest rate outlook, trade mostly higher with modest gains amid the uncertainty.  U.S. futures point to a modestly lower open with the Nasdaq fluctuating between gains and losses in the pre-market with a busy day of earnings and Fed speeches ahead.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include LLY, AEIS, AGCO, AB, DOX, AFG, AMGN, ARMK, AIZ, ATO, ATHM, CLS, CAVA, CNC, CHKP, CMG, CINF, CRUS, CTSH, CMI, DHT, DIOD, DEI, DD, ELF, EW, ENR, ENPH, EQH, ESS, EXEL, FSV, FI, F, FTNT, FRSH, ULCC, IT, GEHC, GILD, HRB, HTZ, HIMX, J, KVYO, KKR, KD, LEA, LIN, LUMN, MSGE, MSTR, NBR, OI, OMC, PAAS, PDS, PRU, REXR, ST, SIMO, SNAP, SPR, SPOT, SONO, TW, UBS, VVV, VFC, WERN, WLI, WTW, XYL, & YUMC.

News & Technicals’

BP, the oil and gas giant, reported a sharp decline in its underlying replacement cost profit, which is used to measure its net profit, for 2023. The profit dropped to $13.8 billion, almost half of the record $27.7 billion it made in the previous year. The company attributed the fall to the lower oil prices and the impact of the pandemic on the energy demand. To boost its shareholder returns, BP accelerated its share buyback program, announcing that it would repurchase $1.75 billion worth of shares before releasing its first-quarter results. BP also reaffirmed its commitment to buy back $3.5 billion worth of shares in the first half of the year.

Central Huijin, the investment arm of China’s sovereign wealth fund, announced that it has increased its buying of exchange-traded funds (ETFs) that track the performance of China’s domestic stock markets. The move is intended to support the market stability amid the recent turmoil and volatility. China’s securities regulator has also intervened to calm the market nerves, issuing several statements to discourage “malicious” short-selling and other illegal activities. The market turbulence has hit the small- and medium-cap stocks the hardest, with the CSI1000 index, which measures their performance, plunging more than 25% this year.

Palantir, the data analytics and software company, announced its fourth-quarter earnings on Monday after the market closed. The company’s revenue for the quarter rose by 20% from a year ago to $608.4 million, beating the market expectations. Palantir CEO Alex Karp said in a letter to shareholders that the company’s large language models, which use artificial intelligence to process and generate natural language, were in high demand in the U.S. market. He said that the company’s products were helping its customers solve complex problems and achieve their missions.

Yellow, the troubled trucking company, announced on Monday that it had paid back the full amount of a disputed $700 million loan that it received from the U.S. Treasury Department during the Covid-19 pandemic, along with more than $151 million in interest. The company was able to repay the loan after it sold most of its assets, including its shipping centers and real estate, for almost $1.9 billion, with the approval of a bankruptcy judge in Delaware. The loan, which was granted by the Trump administration despite the opposition of the Defense Department, was meant to help Yellow survive the crisis and preserve its role as a critical supplier for the U.S. military.

The stock market started the week with a bearish tone, with the S&P 500 falling 0.3% and the Dow losing 275 points. However, the technical damage would have been much worse if not for the tech giants that continue in the thinnest group of market leaders in my more than 30 years of trading experience. Bonds also suffered on the day, driving yields higher, as markets delayed their expectations for the first Fed rate cut due to better-than-expected economic data. Treasury yields have adjusted to this expectation quickly, with 10-year rates going from 3.82% to nearly 4.15% in just a few trading days. Today a huge number of earnings will drive the bullish or bearish inspiration with little more than Fed member speeches on the economic calendar.  That said, the plan for price action remains challenging and volatile.

Trade Wisely,

Doug