Prices Whipsawed

Index prices whipsawed higher with the SPY, QQQ, and IWM surging as investors seemed to say they didn’t care or didn’t believe the higher-than-expected CPI figures. The VIX declined sharply as fear disappeared in a rush to hurry up and buy.  This morning we learned that both the U.K. and Japan have slipped into technical recession though both of their markets continued to move higher.  On tap is a very busy earnings and economic calendar so plan for considerable price volatility as traders and investors digest the data. As you plan forward remember we have a pending PPI report on Friday before slipping into a 3-day weekend.

Overnight Asian markets not still in celebration of the lunar holiday closed mostly higher with Japan stretching above 38,000 for the first time since 1990 though also slipped into recession according to their GDP figures.  European markets trade with bullishness across the board this morning despite learning that the U.K. also slipped into recession.  Ahead of a big day of data U.S. futures look to extend yesterday’s gain suggesting a bullish open but anything is possible as the data is revealed.   

Economic Calendar

Earnings Calendar

Notable reports for Thursday include COIN, DKNG, AEM, AMAT, ARCH, BJRI, BE, CBRE, COHU, CON, CROX, DE, DLR, DASH, DBX, GPC, GLOB, HBI, H, IDA, IR, NSIT, IDCC, IRWD, LH, LECO, LTC, LXP, MERC, OGN, PENN, RS, ROKU, SABR, SHAK, SN, SWAV, SQ, SWAV, SO, SPWR, SKT, TXRH, TTD, TOST, TNET, USFD, VNT, WD, WEN, WFG, YELP, YETI, & ZBRA.

News & Technicals’

Japan, the Asian economic powerhouse, has lost its position as the world’s third-largest economy to Germany, as it entered a recession in 2023. Japan’s nominal GDP, which measures the value of goods and services produced in the country, increased by 5.7% in 2023 compared to 2022, reaching 591.48 trillion yen, or $4.2 trillion. However, this was not enough to keep up with Germany, which grew its nominal GDP by 6.3% in 2023, hitting 4.12 trillion euros, or $4.46 trillion. Germany, the largest economy in Europe, benefited from its strong export sector and fiscal stimulus, while Japan suffered from the impact of the pandemic and natural disasters.

Cisco, the world’s largest maker of networking equipment, announced that it would slash 5% of its global workforce, or about 4,250 jobs, as part of its restructuring plan. The company said the job cuts were necessary to adapt to the changing market conditions and customer needs. Cisco also lowered its revenue and earnings guidance for the current quarter and the full year, citing weak demand and increased competition. The company’s shares fell by more than 7% after the news.

TSMC, the world’s leading chipmaker, saw its stock price soar to a new record on Thursday, after Morgan Stanley raised its price target on Nvidia, one of its major customers. Nvidia, a dominant player in the artificial intelligence (AI) chip market, has been benefiting from the strong demand for its products across various sectors. TSMC, which makes chips for Nvidia and other tech giants like Apple, has also been enjoying robust growth and profitability, as it leverages its technological edge and scale. TSMC’s shares closed at $142.5, up 3.6% from the previous day.

Stellantis, the maker of Jeep and Dodge vehicles, saw its profit decline in 2023, as it faced the impact of labor strikes that affected the Detroit Three automakers. The company’s adjusted operating income margin in North America dropped by 1% from the previous year to 15.4%, as it suffered from production losses and higher labor costs due to new contracts. However, the company still posted solid earnings for the full year, as it benefited from its global scale and diversified portfolio.

The prices whipsawed up on Valentine’s Day after a higher-than-expected U.S. CPI inflation report that sent indexes sharply lower. The SPY, QQQ, and IWM surged higher while the DIA finished the day strong after several substantial whipsaws through the session. A U.K. inflation that remained static helped the European market rally though today the GDP showed they have slipped into recession. Overnight the Nikkei closed above a 1990 high while at the same time, their GDP figures also indicated recession. Today we have a very busy economic calendar that includes Jobless Claims, Retail Sales, Industrial Production, Manufacturing Figures, Import/Export numbers, Inventory Data, Housing figures, and more for the investors to digest.  The earnings calendar is also chalked full of notable reports so prepare for another wild price action day with a pending PPI report on the horizon. 

Trade Wisely,

Doug

Inflation Report Surprised

Some of the shine of the relentless bullish rally quickly faded yesterday as the inflation report surprised to the upside dashing hopes of rate cuts early this year.  Treasury yields surged higher with 10-year coming near this year’s high spiking the VIX sharply as investors grappled with high stock valuations in light of the new data.  Plan for price volatility to be high as we deal with a significant number of earnings reports, Mortgage Apps, Petroleum Status, and Fed Speakers.  With a very busy economic calendar on Thursday and the uncertainty of the pending PPI Report on Friday be prepared for challenging price action as we head for a 3-day weekend.

Overnight Asian markets that were not closed for the Lunar Holiday closed lower in reaction to the U.S. inflation data. However, European markets trade modestly higher this morning after the U.K. reported their inflation of 4% even with their last reading.  The U.S. futures also look higher this morning trying to relive some of the painful decline of yesterday ahead of earnings and economic data.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include CSCO, ALB, ATUS, AWK, AM, AR, APP, ACGL, AVNT, CNQ, CVE, CEVA, CF, CRL, CHEF, CC, CME, CNHI, CDNT, ET, EQIX, FSLY, AG, FCPT, FNV, GNRC, GPN, HL, HLF, HUBS, INFA, IQV, FROG, KGC, KRNT, LAD, LPX, MGY, MTW. MFC, MLM, NROS, NUS, OXY, OC, PGRE, PSN, PTEN, QS, RGLD, R, SAGE, SU, SUN, TMHC, TSEM, TRIP, TWLO, UPWK, VECO, WCN, WMB, & WH.

News & Technicals’

Lyft, a ride-hailing company, saw its stock price surge by 16% in premarket trading on Wednesday after it reported better-than-expected results for the fourth quarter of 2023. However, the company also admitted that it made a serious mistake in its press release, which overstated its earnings outlook for 2024. The company initially said that it expected its adjusted earnings margin to grow by 5% in 2024, but later corrected it to 0.5%. The company apologized for the error and said it was due to a typo.

Airbnb, the online platform for renting and booking accommodation, delivered a strong performance in the fourth quarter of 2023, surpassing analysts’ expectations. The company reported $2.22 billion in revenue, up 22% year-over-year, and said that its guest demand was robust despite the pandemic. Airbnb also expressed confidence in its outlook for the first quarter of 2024, projecting a revenue growth of 25% to 30%. The company attributed its success to its resilience, innovation, and diversification of its offerings.

The U.K. inflation rate remained unchanged at 4% in January, as the cost of furniture and household goods, food, and non-alcoholic drinks eased. However, the core CPI measure, which strips out the volatile components of food, energy, alcohol, and tobacco, was still high at 5.1%, slightly below the expected 5.2%. According to Marion Amiot, a senior European economist at S&P Global Ratings, this reflects the tightness of the labor market, which is driving up wages and inflation, especially in the service sector.

The stock market plunged on Tuesday, but recovered some losses by the end of the day, as the January U.S. CPI inflation report surprised to the upside. Annual inflation was 3.1%, higher than the expected 2.9%, and disappointing the market, crushing rate cut anticipations. Treasury bond yields were up sharply, with the 10-year Treasury yield rising by 0.13% to around 4.31%, close to its yearly peak. This also weighed on stock indexes, which fell by more than 1% each. The Nasdaq, which has more technology stocks, trailed the wider S&P 500, dropping by about 1.8%. The VIX volatility index, which measures Wall Street’s “fear level,” jumped by about 18% to around 16.5. Today traders and investors will have a slew of earnings to navigate along with Mortgage Apps, Fed Speakers, Petroleum Status, and a short-term Bill Auction.  However, traders should keep in mind we have a very busy economic calendar on Thursday as well as the uncertainty of the pending PPI report on Friday.  Plan for volatility to be high and expect big whipsaws as the market tries to come to grips with the economic reality of the longer-than-hoped-for inflation fight.

Trade Wisely,

Doug

Russell 2000 Surged

Yesterday indexes finished mixed as the Russell 2000 surged higher hinting at a possible rotation for the high-flying tech sector to small-cap names.  The afternoon selling raised some caution leaving behind some shooting star patterns on the Nasdaq and SP-500 charts with VIX moving higher diverging from the overall market.  Of course, this action was not a surprise with all eyes on the CPI data pending and the uncertainty that brings to the minds of traders.  We also have a big day of earnings reports so I think it’s fair to say that anything is possible today.  Stay with the trend but continue to raise your stops in case the bears find a reason to attack because big-point moves are possible.

Overnight with many Asian markets still closed, the Nikkei touched 38,000 and nears an all-time high.  However, European markets trade lower across the board this morning with cautiousness as they wait on U.S. inflation data.  U.S. futures also suggest a lower open as we wait on the CPI data that could move the market substantially in either direction.  Buckle up it could be a wild and price action morning.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include ABNB, AKAM, ALC, AIG, ANGI, AN, BIIB, KO, CRK, CRSR, DDOG, DVA, DENN, ECL, WIRE, ENTG, EWT, FELE, GFS, DGGY, GXO, HAS, HE, HRI, HWM, IAC, INCY, CART, INVH, KTOS, DON’T, LDOS, LYFT. MAR, MGM, TAP, MCO, PAAS, PRI, QSR, HOOD, SITM, STAG, MODG, TPG, TRU, UPST, WXO, WELL, WCC, KLG, ZG, & ZTS.

News & Technicals’

JetBlue Airways, a low-cost airline based in New York, is facing pressure from activist investor Carl Icahn, who disclosed a 9.9% stake in the company on Monday. Icahn believes that JetBlue is undervalued and has the potential to grow its market share and profitability. He has expressed his interest in joining the board of directors and influencing the company’s strategy and governance. JetBlue, which has been struggling to recover from the pandemic and the failed merger with Spirit Airlines, has been implementing cost-cutting measures and operational improvements to boost its performance and competitiveness.

Nvidia, a leading chipmaker and technology company, has seen its stock price soar to record highs, sparking fear of missing out (FOMO) among investors. According to Julian Emanuel, a senior managing director at Evercore ISI, many of his clients, who have experienced the dot-com bubble and burst, are more concerned about not having enough exposure to Nvidia than having too much. He said this is the first time he has seen this sentiment since 2021, which he views as a warning sign. He also expects a 13% correction in the stock market this year, which he thinks is normal in a non-recessionary environment.

The perception of China and Russia as threats to the West has decreased in the past year, according to a new survey that reveals the growing awareness of non-conventional risks. The survey, conducted among G7 countries, shows that mass migration caused by war or climate change and the spread of radical Islam are now the most feared risks among Western populations. The survey also indicates that most Westerners expect China and the Global South to gain more influence and power in the next ten years, while the West will face stagnation or decline.

The stock market was mixed on Monday, with the S&P 500 falling slightly, while the Dow added about 120 points and the Russell 2000 surged higher, gaining about 2%. The best-performing sectors were energy, utilities, and materials, while information technology and consumer discretionary trailed behind. Treasury yields were stable, with the 10-year yield ending around 4.17%.  Oil prices did not change much, closing at about $77 a barrel. This morning the Small Business Optimism Index missed expectations showing a decline disappointing the market sending premarket futures lower. Before the market opens the Inflation data will be the main focus for markets, with the CPI report, and could create significant price volatility considering the very extended condition of the indexes. Beyond that, we have a large number of earnings that will keep traders gambling on the next big mover. Buckle up anything seems possible today.

Trade Wisely,

Doug

Crossed 5,000

The bulls celebrated as the SP-500 crossed 5,000, a psychological level that can serve as a significant level of support or resistance. The Nasdaq led the rally pushed by the tech giants that continued their parabolic rise. This week anything is possible with a CPI report on Tuesday, a slew of reports grouped into Thursday, and then a PPI report on Friday as we slide into a 3-day weekend. Of course, we will toss in a bunch of earnings reports and some Fed speeches to keep the price volatility challenging. 

Many of the Asian markets were closed to their extended celebration of the Lunar New Year. However, European markets traded mostly higher this morning with only the FTSE moving slightly lower.  Ahead of a Tuesday CPI, U.S. futures suggest a flat maybe slightly bearish open perhaps resting after the record highs made on Friday.  Buckle up it could be a wild week as the data is revealed. 

Economic Calendar

Earnings Calendar

Notable reports for Monday include ANET, CAR, BLKB, BHF, CDNS, FRT, GT, HPP, LSCC, MNDY, MEDP, & OTTR.

News & Technicals’

Russia’s economy is expected to grow faster than previously anticipated, according to the International Monetary Fund (IMF). The IMF revised its projection for Russia’s GDP growth in 2024 from 1.1% to 2.6%, citing improved domestic demand and higher oil prices. However, Russia’s economic recovery is also driven by its massive military spending, which has increased sharply since the outbreak of the war. The IMF’s managing director, Kristalina Georgieva, warned that Russia’s economic model is unsustainable and resembles the Soviet era, with heavy reliance on state-owned enterprises and low diversification.

Elon Musk, the billionaire entrepreneur and founder of Tesla and SpaceX, is facing a legal battle with the U.S. Securities and Exchange Commission (SEC) over his takeover of Twitter in 2022. A U.S. judge has ordered Musk to appear in court and answer questions about his acquisition of the social media giant, which the SEC suspects was a case of securities fraud. The SEC claims that Musk manipulated the stock price of Twitter by buying shares before announcing his intention to buy the company with borrowed money. Musk, who has a history of clashing with federal regulators, denies any wrongdoing and argues that he has the right to challenge the SEC’s authority.

Germany, the largest economy in Europe, is facing a bleak economic outlook for 2024. The latest data shows that the country’s GDP contracted by 0.2% in the fourth quarter of 2023, marking the second consecutive quarter of negative growth. Economists warn that Germany may slip into a technical recession this year, as the recovery from the pandemic is hampered by various challenges. These include the impact of trade tensions, rising energy costs, and political instability both at home and abroad. While some economists hope that the worst is behind, they remain pessimistic about the prospects of robust growth in 2024.

The EU, which claims to be a leader in environmental protection, is facing a backlash from its citizens over its climate policies. Farmers across Europe have been protesting against the EU’s plans to reduce pesticide use and greenhouse gas emissions, arguing that they would harm their livelihoods and competitiveness. As a result, the European Commission, the EU’s executive branch, has decided to abandon its proposal to cut pesticide use by half. Moreover, the Commission has also excluded the agricultural sector from its ambitious goal of slashing greenhouse gas emissions by 90% by 2040. These moves have raised doubts about the EU’s commitment and credibility in tackling the climate crisis.

The U.S. stock market mostly rose on Friday with the Dow lagging slightly, as the S&P 500 crossed 5,000, reaching new record highs. Big round numbers like this tend to serve as strong psychological support levels if prices hold above but also tend to serve as strong resistance levels if prices happen to fall below. Small-caps, consumer discretionary, and technology sectors led the market, as oil prices also increased. The 10-year Treasury yield edged higher on Friday, continuing the rise in interest rates since last week, as bond markets delayed their expectations for Fed rate cuts. This week will be highlighted by a CPI number on Tuesday followed by a reading on PPI Friday which just happens to be the February option expiration before a 3-day weekend. Of course, we will continue to have notable earnings events to add to the price action volatility.  Stay with the upside trend but continue to raise your stops should the market stumble on one of these data points.

Trade Wisely,

Doug

Earnings Results

The bull trend continues despite the rate of uncertainty fueled by earnings results and a remarkable willingness to chase the very extended tech titians higher.  I think we can expect more of the same as we roll out a huge number of earnings reports through the end of the week. That said, manage your positions closely because the bears are beginning to act a bit more aggressively, and if the bulls stumble or run out of energy an attack could begin quickly. Plan for considerable price volatility as the market reacts to all the pending reports.

While we slept Asian markets closed mixed but mostly higher as China pushed hard to stimulate buying confidence as manufacturing and real-estate woes continue.  European markets trade modestly lower across the board this morning as the rate uncertainty continues.  Although U.S. futures traded lower overnight once again they are working hard in the premarket to recover losses as earnings results roll out. 

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include DIS, ADNT, BABA, ALL, ARCC, ARM, ASGN, ACLS, BTG, BHK, BG, CCJ, CG, CFLT, CXW, COTY, CVS, DAY, EMR, EHC, ENS, NVST, EFX, EG, FAF, FLT, FOX, FNV, GL, GRPO, GPRE, GFF, HAIN, HLT, KMT, KGC, KN, KGS, MANU, MCFT, MAT, MCK, MOH, MPWR, MUSA, NFG, NTGR, NYT, NWSA, OHI, ORLY, PAYC, PYCR, PYPL, PAG, PFGC, RDN, RDWR, REYN, RBLX, SMG, SLAB, TTGT, TRI, TTMI, VSH, XPO, & YUM.

News & Technicals’

Snap, the maker of the popular social media app Snapchat, reported a modest increase in its fourth-quarter revenue, while its net loss shrank from a year ago. However, the company’s revenue and forecast fell short of the market expectations, sending its shares lower. Snap blamed the Middle East conflict for slowing down its growth, as it said in a letter to investors on Tuesday that the geopolitical turmoil hurt its advertising business.

Chipotle, the fast-casual Mexican restaurant chain, reported strong earnings and revenue for the fourth quarter, exceeding the market forecasts. The chain’s same-store sales, which measure the performance of its existing locations, also surpassed expectations, showing healthy growth. Chipotle attributed its success to the increase in its customer traffic, which defied the general decline in the restaurant industry. Chipotle said that its digital and delivery initiatives, as well as its menu innovations, helped attract more customers and boost its sales.

Ford, one of the leading car manufacturers in the world, is revising its plans for investing in electric vehicles (EVs). According to its CEO Jim Farley, the company is facing challenges in making EVs affordable and profitable for the average customer. While Ford remains optimistic about the future of EVs, it has decided to reduce its spending on this segment by $12 billion. This move reflects the uncertainty and complexity of the EV market, which is still evolving and developing.

Despite beating analysts’ estimates for its fourth-quarter performance, CVS Health delivered a disappointing outlook for 2024. The healthcare giant blamed rising medical expenses for its lower earnings guidance, which reflects the challenges faced by the insurance sector amid the pandemic. CVS Health, which operates pharmacies, clinics, and health plans, said it expects to earn at least $8.30 per share in 2024, down from its previous projection of at least $8.50 per share.

Earnings results continue to help the indexes push higher to close mostly in the green on Tuesday. The S&P 500 and the NASDAQ, edged up by about 0.2% and 0.1%, respectively. However, after the morning pop, the market largely chopped sideways on relatively low volume. The best-performing sectors in the S&P 500 were real estate and materials, each gaining about 1.5%. After dropping by about 2% in the previous two days, U.S. small-cap stocks bounced back by about 0.6%. Today traders will look for inspiration in the huge number of earnings reports as well as Mortgage Apps, International Trade, Petroleum Status, several Fed speakers, and bond auctions.  The trend remains bullish but the hint of uncertainty could bring the bears in quickly so continue to manage your positions carefully to protect profit if the bull begins to stumble.

Trade Wisely,

Doug

Bearish Tone

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

Big Tech Profits

Markets surged and more records were made as the investors celebrated the big tech profits.  However, the Employment Situation rained on the tech party coming in much hotter than expected causing bond yields to rally as rate worries grew.  We have an overall lite week on the economic calendar, however, there will be Fed speeches a plenty as they come out from under their blackout period. The focus will be on the busy earnings calendar so plan on some challenging price volatility. 

Overnight Asian markets closed mostly lower with the Nikkei the only index posting gains, up 0.54% with Shanghai leading the selling down 1.02%.  European markets trade green across the board this morning kicking off the week on a positive note.  U.S. futures have rallied sharply off the overnight lows fueled by earnings results, however, continue to suggest a flat to negative open concerned about Powell’s rate comments and rising bond yields. 

Economic Calendar

Earnings Calendar

Notable reports for Monday include AMG, APD, ALGT, AMKR, DRBR, CBT, CAT, CHGG, COHR, CCK, EL, FN, GBDC, HI, IDXX, JJSF, KFRC, KRC, MCD, NXPI, ON, PLTR, RMBS, SPG, SSD, SKY, TSN, VRNS, & VRTX.

News & Technicals’

In an interview with “60 Minutes” on Sunday, Federal Reserve Chair Jerome Powell said that the central bank will be cautious about lowering interest rates this year. He said that the Fed needs more evidence of a strong economic recovery before it starts to reduce the cost of borrowing. Powell also acknowledged that the Fed’s previous interest rate hikes had some negative effects on the economy. However, he said that the impact was not as severe as some had feared.

A bipartisan group of senators unveiled the details of their long-awaited bill to provide financial assistance to Ukraine, Israel, and the U.S. southern border. The bill, which was first proposed by President Joe Biden in October, aims to support the security and stability of these regions amid rising threats and challenges. The bill has faced months of delays and disagreements in the Senate, where some lawmakers wanted to prioritize different aspects of the aid package. The bill will also face a tough battle in the House, where Republicans have introduced their bill that would only fund Israel.

Turkey’s inflation soared to its highest level in decades in January, as prices of food, drinks, tobacco, transportation, and housing surged. The inflation rate rose by 6.7% from December, the biggest monthly increase since August, and by nearly 65% from a year ago. The inflation figures were released two days after Turkey named a new central bank governor, Fatih Karahan, who faces the daunting task of restoring confidence in the Turkish lira and stabilizing the economy.

The stock market ended the week on a high note as it celebrated big tech profits with the Mag7 totaling a full 33% of the SP-500. The U.S. economy added more jobs than expected in January with the nonfarm payroll increasing by 353,000, far exceeding the forecast of 185,000 new jobs. This boosted the U.S. Treasury yields, with the 10-year yield rising by 0.14% to 4.02%. The 2-year yield, which is seen as an indicator of the future fed funds rate, also increased by 0.16% to about 4.36%. Stocks managed to rise despite the higher yields on Friday.  Today we have a busy day on the earnings calendar with PMI, ISM bond auctions, and Fed speakers to provide bullish or bearish inspiration. 

Trade Wisely,

Doug

Hesitation and Caution

Tuesday turned out about as one would expect with a healthy dose of hesitation and caution ahead of big tech reports and an FOMC decision scheduled for 2 PM Eastern this afternoon. Earnings reports from MSFT, GOOG, and AMD produced mixed results but all creating a bearish opening in the Nasdaq this morning.  With a busy day of earning and market-moving economic reports expect challenging price volatility as we wait for Jerome Powell and his merry band of academic’s interest rate decision and press conference. 

Overnight Asian market traded mixed but mostly lower as Australia hit a new record high while at the same time China closed at a 5-year low after weak manufacturing data.  European markets trade mostly higher with modest gains and losses as they cautiously wait on the U.S. rate decision.  U.S. futures also point to mixed open with the industrials suggesting bullishness with the tech sector is challenged by bearishness as traders react to big tech results.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include APTV, ADP, AFL, AEM, AGI, ALGN, AVB, BA, BSX, EAT, CHRW, CP, CLB, CTVA, DGII, EVR, EXTR, FLEX, FTV, GSX, HES, HESM, HESM, KLIC, LII, MA, MTH, MEOH, MET, MTG, NDAQ, NYCB, NTR, ODFL, PSX, PTC, QRVO, QCOM, RYN, ROK, ROP, SLAB, TTEK, TEVA, TMO, TRI, UGI, VSTO, & WFG.

News & Technicals’

Alphabet, the parent company of Google, beat the market expectations on both revenue and profit for the fourth quarter, but its ad revenue fell short of the estimates. The company attributed the lower ad revenue to the impact of the pandemic and the regulatory pressures on its online advertising business. Alphabet also reported a $2.1 billion charge for 2023, related to the layoffs it made last year to cut costs and streamline its operations. Despite the challenges, Alphabet shares have risen 56% in the past year, excluding the decline in the after-hours trading.

Microsoft delivered better-than-expected results for the fourth quarter, as its Azure cloud business grew faster than the market anticipated. The tech giant also announced its biggest acquisition ever, buying Activision Blizzard, the maker of popular video games such as Call of Duty and World of Warcraft, for $68.7 billion. However, Microsoft gave a cautious outlook for the current quarter, as it faces supply chain challenges and increased competition in the cloud market.

AMD, the chipmaker that produces graphics processing units, or GPUs, reported a strong quarter, driven by the demand for its products in the field of generative artificial intelligence. GPUs are essential for creating and running AI models that can generate realistic images, sounds, and texts. AMD faces stiff competition from Nvidia, the leader in the GPU market, but it claims that its new AI chips, launched last year, can rival Nvidia’s H100 GPUs in some use cases. AMD said that its server GPU sales, which cater to the cloud and data center customers, grew significantly during the quarter.

Walmart, the world’s largest retailer, declared a three-for-one stock split on Tuesday, meaning that each shareholder will receive two additional shares for every share they own. The company said that the new shares will be distributed on Feb. 23, after the market closes, to the shareholders who owned the stock as of Feb. 22. The stock split will lower the price of each share, making it more affordable for investors. Walmart’s stock closed Tuesday at $165.59, close to its record high of $169.94 that it reached in November.

The stock market ended the day mixed with some hesitation and caution as we waited for big tech reports and the pending FOMC decision. The JOLT’s report exceeded expectations adding a touch of uncertainty because the Fed continues to be concerned with getting some balance in the jobs market. Short-term yields rose after the encouraging consumer confidence and labor-market reports. The 2-year Treasury yield increased to 4.36%, while the 10-year yield stayed around 4.05%. Today we have a busy day of earnings with Mortgage Apps, ADP, Treasury Refunding, Employment Costs, Chicago PMI, Petroleum Status, with an FOMC rate decision and press conference to inspire the bulls and bear. Expect considerable price volatility and watch for the potential of some big point moves in the indexes as we wrap up the month.

Trade Wisely,

Doug

Big Afternoon Surge

Big Afternoon Surge

Early morning bearishness quickly turned to a choppy morning session that rather suddenly rocketed up in a big afternoon surge with rather low volume.  DIA, SPY, and QQQ all closed at new record highs as traders showed tremendous confidence heading into big tech reports and an FOMC decision.  After the bell, we will get the highly anticipated reports from MSFT, GOOGL, and AMD.  Plan for a substantial gap Wednesday morning as a result so plan your risk accordingly also keeping in mind the pending FOMC decision.  Buckle up for some potentially wild and challenging price action.

Overnight Asian markets closed mixed but mostly lower with Hong Kong and Shanghai leading the selling in reaction to the Evergrande liquidation order adding more uncertainty to China’s real-estate decline.  However, across the pond, the European markets are green across the board this morning celebrating a stagnating GDP instead of slipping into recession.  U.S. futures point to a slightly bearish open ahead of big tech reports and pending rate decisions on the horizon. 

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include GOOGL, MSFT, AOS, AMD, ASH, BXP, CCJ, CB, GLW, DHR, EA, EQR, GM, HA, HCA, HUBB, JBLU, JCI, JNPR, LC, LFUS, MOD, MDLZ, MPLX, MSCI, PNR, PFE, PHM, SWKS, SBUX, SYK, SYY, TECK, TER, UNUM, UPS.

News & Technicals’

The Big Tech companies are in the spotlight, as they reveal their earnings for the latest quarter. Microsoft and Alphabet will announce their results on Tuesday after the bell, while Meta Platforms, Apple, and Amazon will follow on Thursday. Investors are expecting robust performance from these behemoths, which boosted their share prices to new highs on Monday. The rally in Big Tech lifted the S&P 500 to a new record – and its first close above 4,900. The Dow Jones Industrial Average also reached a new peak at the end of the day.

The eurozone economy showed signs of resilience in the last quarter of 2023, according to the preliminary data released by the EU’s statistical office on Tuesday. The bloc managed to dodge the mild recession that was predicted by a Reuters survey of economists after its GDP shrank by 0.1% in the third quarter. The euro zone’s GDP, adjusted for seasonal variations, did not change from the previous quarter and grew by a meager 0.1% from a year ago.

Neuralink, the brain-computer interface company founded by Elon Musk, announced that it had successfully implanted its device in a human for the first time on Sunday. The patient, whose identity was not disclosed, is “doing well” after the surgery, according to a post on X, a social media platform for scientists and researchers. Neuralink started enrolling patients for its first human trial in the fall, after getting the green light from the FDA in May. The trial is part of Neuralink’s ambitious goal to bring its technology to the market and enable people to control computers and machines with their minds.

Reed Hastings, the co-founder and executive chairman of Netflix, has donated two million shares of the online video service, as per a regulatory filing. The shares are worth more than $1.1 billion at the current market price. Hastings, who has a net worth of $6.6 billion, according to the Bloomberg Billionaires Index, holds a large stake in Netflix, which he helped create in 1997.

With a big afternoon surge the DIA, SPY, and QQQ closed at new record highs, ahead of a hectic week for the macro economy. The Russell 2000 index, worked to catch up action and was the best performer, gaining about 1.4% on the day. The NASDAQ, of course, also did well, increasing by more than 1% as the tech titans continued to stretch higher in anticipation of earnings. Will their earning support these lofty valuations?  We will soon find out. Today the FOMC will begin deliberations on interest rates and we will get their decision Wednesday afternoon at 2:00 Eastern.  After the bell today we will also get the highly anticipated earnings reports from GOOGL, MSFT, and AMD.  The results could create considerable price volatility on Wednesday including a substantial morning gap so plan your risk carefully my friends.

Trade Wisely,

Doug

INTC Disappointment

INTC Disappointment

Friday’s price action was highlighted by the INTC disappointment and perhaps a little worry that many of the big tech companies have been priced to perfection with several Mag7 reports pending this week.  These huge company reports will be joined by a busy week of economic data that includes an FOMC rate decision on Wednesday and a Friday Employment Situation report.  Traders should plan for gap up or gap down market opens on the results of Mag7 earnings, possible big point whipsaws along with overall price volatility that could prove challenging for inexperienced traders.

Overnight Asian market closed mostly higher even as one of China’s largest developers was ordered to liquidate by a Hong Kong court. European market trade mixed this morning after last week’s surge to a two-year high. U.S. futures have recovered off of overnight lows putting on a brave face ahead of a huge week of market-moving data that could create substantial price volatility.  Buckle up it could be a wild week ahead.

Economic Calendar

Earnings Calendar

Notable reports for Thursday include ARE, CADE, CALX, CLF, CR, ELS, FFIV, BEN, GGG, HLIT, HP, NUE, PPBI, PCH, SANM, SMCI, WHR, & WWD.

News & Technicals’

The stock of China Evergrande, the debt-laden property developer, suffered a sharp drop of more than 20% in the morning session, triggering a temporary trading halt. The plunge came after a Hong Kong court ruled that Evergrande had to repay $260 million to a group of bondholders who had sued the company for defaulting on its obligations. The court decision added to the woes of Evergrande, which had been hoping to reach a last-minute agreement with its foreign creditors over the weekend to restructure its $300 billion debt. However, the talks reportedly broke down, leaving Evergrande on the brink of collapse.

The future of some of the world’s biggest pharmaceutical companies is uncertain, as they face the looming threat of patent cliffs in the next decade. Patent cliffs are the periods when the exclusive rights to sell one or more of their top-selling drugs expire, allowing generic rivals to enter the market and undercut their prices. Bristol Myers Squibb, Merck, and Johnson & Johnson are among the companies that could lose tens of billions of dollars in sales by 2030 due to patent cliffs. However, some of these companies have taken steps to mitigate the impact of patent expirations, such as developing new drugs, acquiring smaller biotech firms, or expanding into new markets.

China is reportedly planning to transfer the control of three of its largest state-owned asset management companies to its sovereign wealth fund, China Investment Corp, in a bid to bolster its financial stability. According to Xinhua Finance, the move would affect China Cinda Asset Management, China Orient Asset Management, and China Great Wall Asset Management, which were established in the late 1990s to deal with bad debts from the banking sector. The plan comes as China faces a severe stock market slump and a mounting debt crisis in its property sector, which has triggered fears of a systemic collapse. By handing over the asset managers to China Investment Corp, Beijing hopes to improve its governance, efficiency, and profitability, as well as to diversify its business scope and reduce its reliance on the domestic market.

Oil prices rose sharply after a series of missile attacks by Iran-backed militants in the Middle East. The attacks targeted a fuel tanker in the Red Sea, causing a fire and a large oil spill, and a U.S. military base in Jordan, killing three U.S. soldiers and wounding several others. The attacks were carried out by unmanned aerial drones, which Iran has been supplying to its allies in the region. The escalation of tensions in the oil-rich region sparked fears of a wider conflict and disrupted the global oil supply.

The U.S. stock market edged down Friday with the INTC disappointment, ending a six-day winning streak. Technology stocks have been leading the rally, lifting the main indexes to record levels, but after Intel reported weak earnings the QQQ is perhaps showing a little worry about the elevation in the tech giants ahead of earnings. Focus this week with be the several Mag7 earnings reports along with the general ramp of earnings numbers.  Along with likely earnings volatility, we have a big week of market-moving economic reports that include an FOMC rate decision and the Employment Situation coming Friday. All these things combined with the very high prices in big tech could make for a wild week of price action. Expect big morning gaps, and watch for the possibility of substantial point whipsaws as investors react to all the data.

Trade Wisely,

Doug