Last week’s financial failures quickly highlighted how fragile our banking system has become with a slowing economy and a quantitative tightening cycle to battle inflation. However, as federal regulators work to backstop the SVB failure, worries grow about just how far the contagion has already spread. Add in a massive week of market-moving economic data and the stage for another week of wild price volatility as investors face a very uncertain path forward. Expect face-ripping whipsaws of significant overnight reversals as the market comes to grips with inflation, a possible recession, and a slowing economy.
Asian markets trade mixed as Hong Kong surges 1.95% and Japan falls 1.11% as uncertainty grips the financial system. On the other hand, European markets trade decidedly bearish this morning as banks sell off 5.7% as the bank failures ripple through the monetary system. U.S. futures went on a rollercoaster ride at night after regulators announced a backstop plan for SVB as investors worry about the potential contagion spreading to other banks. Prepare for another wild day of price action.
With first-quarter earnings winding down and the stock buyback blackout period about to begin, so will all the hyper-earnings emotion until we begin the 2nd quarter silly season. Notable reports for Monday include GTLB & KOD.
News & Technicals’
Regulators approved plans Sunday to backstop depositors and financial institutions associated with Silicon Valley Bank. Officials will unwind both SVB and Signature Bank, ensuring that depositors can access their funds on Monday. The Federal Reserve stepped in with a separate facility that will provide loans for up to one year for institutions affected by bank failures. “Today, we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” leading regulators said in a joint statement.
Billionaire investor Bill Ackman said the U.S. government’s intervention to protect depositors after the implosion of Silicon Valley Bank is “not a bailout” and helps restore confidence in the banking system. In a tweet, Pershing Square CEO said SVB’s fallout on Monday noted the government did the “right thing.” But not all Wall Street analysts are convinced the regulator’s action will shore up confidence in the U.S. banking system and limit the fallout. “I don’t think that you can understate the danger that the American banking system is in,” veteran bank analyst Dick Bove told CNBC’s “Squawk Box Asia” on Monday.
“In light of the stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its next meeting on March 22,” Goldman economist Jan Hatzius said in a Sunday note. The firm expects the latest measures to “provide substantial liquidity to banks facing deposit outflows” and boost confidence among depositors.
The failures of Silvergate and SVB banks brought out the bears in a big way last week, bringing to light just how fragile our banking system has become in the slowing economy. Suddenly the Fed is back into bailout mode as the market worries just how far the banking contagion might spread. Nevertheless, the futures market rallied sharply during evening trading after the decision to announce the SVC backstop plans to regulators. However, the bailout enthusiasm seems to have faded substantially this morning, and traders should plan for considerable price volatility as the market comes to grips with the uncertainty of what comes next. With a massive week of market-moving economic data, prepare for just about anything in the week ahead.
Disappointing economic data and continued hawkish comments from Powell kept the bears engaged Wednesday. Still, the bulls defended vital price support levels at the close, raising hope of a near-term relief rally while evidence of a pending recession grows. Today investors will deal with Jobless Claims and more Fed comments as we wait for the potentially market-moving Employment Situation report Friday before the bell. Big point moves and substantial intraday whipsaws remain likely, so plan your risk carefully.
While we slept, Asian markets traded mixed as China reported inflation growth of 1%, the slowest pace so far this year. This morning, European markets trade with modest declines across the board as investors grapple with higher interest rates and growing recession concerns. However, U.S. futures trade near the flat line this morning as we wait on Jobless claims while hoping for a relief rally inspired by the buying into the Wednesday close. Expect the challenging price action to continue as we wait for the Friday Employment Situation report.
The Netherlands has become embroiled in political tensions between the United States and China, with the former looking to ensure that Beijing does not use the most advanced chip technology. As a result, Dutch Foreign Trade Minister Liesje Schreinemacher said, “the existing export control framework for specific equipment used for the manufacture of semiconductors needs to be expanded in the interests of national and international security.” China has been working to bolster its domestic semiconductor industry, but it remains far behind the likes of Taiwan, South Korea, and the U.S. New semiconductor export controls have been imposed by the U.S. on China, and the eurozone nations will soon follow suit.
President Joe Biden this week called for higher taxes on wealthy Americans to extend Medicare funding as part of his 2024 budget. The plan would increase the net investment income tax to 5%, from 3.8%, for earnings of more than $400,000, including regular income, capital gains, and so-called pass-through business income. However, the plan is unlikely to pass in the Republican-controlled House of Representatives.
Solanezumab’s failure is a blow to efforts to treat Alzheimer’s in people in the very early stage of the disease and has not yet shown clinical symptoms. In addition, Solanezumab did not clear or halt the accumulation of brain plaque and did not slow cognitive decline in the treatment participants. Lilly is developing two other Alzheimer’s treatments in late-stage clinical trials.
Inflationary economic data and the continued hawkish comments from the Fed kept the bears engaged on Wednesday though the VIX showed little fear and key price supports held in the major indexes. However, the U.S. dollar remained strong, and the bond inversion worsened during the day, suggesting a recession that will likely be made worse by the Fed having to raise rates to combat inflation. Evidence is mounting that it’s much less a question of whether the market will decline but more of when the decline gains strength. That said, the current short-term oversold condition may trigger a little relief rally but don’t ignore the overhead resistance as the likely area where the bear could gather for the next attack.
Although the bulls pushed to test overhead index resistance and downtrend levels, the bullish energy faded into the close as we hurry up and wait for Powell’s Senate testimony this morning. Recent inflationary economic data will likely inspire some tough questioning from the committee. Will we see a tough-talking hawkish Chairman or the gentle dovish version still touting a soft landing that supports the current rally? Expect considerable price volatility as traders and investors hang on every word looking for the path forward. Anything is possible, so plan carefully.
Asian markets traded mixed with modest gains and losses, awaiting the chairman’s congressional testimony. However, European bulls work to add to recent gains, apparently expecting dovish Fed comments. U.S. futures also try to put on a brave face suggesting a modestly bullish open, hoping Powell’s comments will support the recent index surge upward with Fed pivot ringing in its ears.
Notable reports for Tuesday include CASY, CRWD, DKS, DOLE, JKS, SWIM, MANU, SE, SQSP, SFIX, SUMO, THO, & WTI.
News & Technicals’
Best Buy has struck a deal to sell devices and handle the installation of a program that allows patients to get hospital care at home. The consumer electronics retailer is expanding its healthcare business as sales of other consumer electronics slow. CEO Corie Barry said on an earnings call that Best Buy expects sales in its health division will grow faster than the rest of the business this fiscal year.
Return-to-office plans fall short leaving commercial real estate empty and at risk of default. CEO Corie Barry said on an earnings call that Best Buy expects sales in its health division will grow faster than the rest of the business this fiscal year. He added that the Covid-19 pandemic forced millions of people to work from home for the first time, and they don’t necessarily want to go back.
Meta is planning more cuts after its first round of layoffs, possibly affecting thousands of jobs. The layoffs could begin this week and affect thousands of employees. The cost-cutting comes in addition to previously announced plans to lay off 13% of Meta workers. Meta CEO Mark Zuckerberg is pitching 2023 as the “Year of Efficiency.”
Monday’s market was essentially a hurry-up-and-wait event as bulls attempted to crack resistance and downtrend levels early in the session. However, uncertainty about the pending Powell testimony faded enthusiasm, leaving shooting star patterns across the indexes. As the Senate committee grills the Fed chairman, what he says will be far less important than how the market interprets his answers. Recent economic reports could spark a bit more hawkish-sounding Powell, disappointing a market that wants to hear dovish statements to support the current rally. The charts suggest big price swings are possible, so expect considerable volatility, whipsaws, and reversals as investors try to guess what comes next as Powell speaks.
As bond yields modestly pulled back, the bulls staged an exuberant celebration rushing back into stocks, suggesting inflation, rate increases, and the slowing economic reports no longer matter. Perhaps we will find out this week as Powell testifies in Congress and the indexes deal with overhead resistance and the current downtrends. Nevertheless, I suspect the big point price swings will continue, so plan carefully as we rally into levels that could harbor entrenched bears. Enjoy the ride but be prepared for maybe a wild one!
Asian markets mostly gained overnight after China released modest economic growth targets over the weekend. European markets trade mixed this morning with modest gains and losses after the Friday surge of buying. However, U.S. futures appear a bit more unsure as we head to the open. They currently suggest a very slight bearish open as they ponder the gravity of Powell’s pending testimony in Congress on Tuesday.
Earnings season is beginning to slow down, but we still have a relatively busy week of reports. Notable reports for Monday include AVAV, CVGW, CIEN, RIDE, NTNX, TCOM, & WW.
News & Technicals’
A slew of foldable devices has hit the international market this year as electronics giants, mainly Chinese, look to catch up to Samsung in a smartphone category it pioneered. However, analysts have questioned how big the foldable category can get, given the devices’ high price and lack of apparent uses right now. Nevertheless, last month Chinese vendors Honor and Oppo launched their foldable smartphones.
Sen. Mark Warner, D-Va., said Sunday he is introducing a broad bipartisan bill that will outline an approach to banning or prohibiting foreign technology like TikTok. Warner said he is working on the bill with Sen. John Thune, R-S.D., and that he is concerned over the type of content Americans see on the platform. Warner’s bill comes after the U.S. House Foreign Affairs Committee voted Wednesday to advance a bill granting President Joe Biden the authority to ban TikTok.
Veeva Systems announced in December that it would move its customer management software off of Salesforce’s platform and onto its home-brewed technology in 2025. That will reduce revenue for Salesforce, which has contractually not been allowed to compete with Veeva in the life sciences sector. On Wednesday, Veeva said it plans to demonstrate the technology in May.
The bulls closed last week with an exuberant celebration as the bond yields subsided modestly. The SPY and QQQ regained their 50-day moving average supports; however, they left the question of the overhead resistance and the current downtrend, as did the IWM. We also have the complication of the DIA with a substantial overhead resistance of price and technicals that could serve as a bearish moving average squeeze. Perhaps this week, we will find out if we can continue to ignore the economic slowdown and rising interest rates by breaking to new highs or if the bears have regrouped for an attack at resistance levels. With the big point price swings of late, anything is possible as Powell heads to the hill to be grilled by Congress.
As investors reacted to earnings and economic reports piling up, evidence of a slowing economy, the indexes produced a rollercoaster ride of whipsaws, leaving more questions than answers by the close of day. On the positive side, the indexes held near technical and price support levels but did so with substantial uncertainty as the 10-year bond topped 4%. Expect more volatility this morning with jobs and productivity numbers before the bell to set the stage for the day. We could be setting up for a significant market move soon, but it could go in either direction, so plan carefully.
Asian markets struggled with direction overnight, closing mixed as investors grappled with the impacts of pending rate increases. European markets trade with modest losses this morning after posting an 8.5% inflation number suggesting the ECB has a lot of work ahead to curb the rising costs. At the time of writing this report, U.S. futures suggest a mixed open with potential market-moving economic data capable of changing everything by the open.
Tesla CEO Elon Musk took the stage to present his “Master Plan Part 3” for the company at its 2023 Investor Day in Austin. The company’s manufacturing leader, Tom Zhu, revealed that as of Wednesday, Tesla had produced 4 million cars. The presentation was long on vision and a review of prior achievements but short on specifics about new Tesla products or services.
Inflation in the eurozone eased slightly to 8.5% in February, even as the ECB signaled that the interest rate hiking cycle might not end. Core inflation rose to an estimated 5.6% in February from 5.3% in January. Goldman Sachs said earlier this week that they were raising rate hike expectations for the ECB.
Salesforce beat expectations across the board. In addition, the company is expanding its share buyback program after introducing it last year. Salesforce announced layoffs during the quarter as activists pushed it to become more profitable.
Wednesday’s price action was a rollercoaster ride of whipsaws that marked a new low for the week, but in the indexes, while technically resolving nothing. Though the economic data continues to signal a slowing economy, the VIX shows investors have little fear as the recession evidence grows. The good news is that index price support levels held by the end of the day, with Dow making the most effort to rally as the first day of March trading came to a close. I believe the indexes are setting up for a significant market move, but the question is in which direction? Plan carefully with Jobless Claims and Productivity & Costs report before the bell setting the stage for another day likely to produce challenging volatility.
Tuesday’s early bullish hopes faded before the open, with disappointing economic numbers inspiring the bears as slowing economic conditions raise recession worries among investors. Though we have primarily tried to ignore the clues of a stressed consumer, the compounding impacts are becoming more evident as LOW adds to the chorus of retail companies uncertain about the path ahead. With the majority of 1st quarter earnings in the rearview poor economic numbers will be harder to ignore as we face another rate increase later this month. Plan for overnight reversal and significant intraday whipsaws to continue as the uncertainty grows.
While we slept, China reported a pickup in factory activity, with the tech-heavy HSI surging 4% while the ASX declined slightly. However, the European market’s trade decided bullish this morning, hoping to relieve the recent selling. With several pending and potentially market-moving economic reports and a bevy of retail earnings, U.S. futures push for a positive open, hoping to relieve the recent downturn and hold technical index supports.
Lowe’s sales in its fiscal fourth quarter fell short of Wall Street’s expectations. The home improvement retailer issued a conservative outlook as the sector comes under pressure from a shift in consumer spending.
General Motors is cutting hundreds of salaried positions as it follows other major companies, including competitors, in downsizing headcounts to preserve cash and boost profits. The cuts affect about 500 positions, according to a person familiar with the plans, announced Tuesday internally.
In November, Rivian reaffirmed its full-year guidance of an adjusted loss before income, taxes, depreciation, and amortization of $5.4 billion. For 2023, Rivian forecast vehicle production of 50,000 vehicles. That would be roughly double last year’s amount but below analysts’ expectations of around 60,000. Rivian is focusing on ramping up its R1 truck and SUV production and an electric delivery van it builds for Amazon, its largest individual shareholder.
The Tuesday pre-market pump faded before the beginning of trading as disappointing economic numbers that point to a slowing economy and an inflation-stressed consumer change their spending habits. As we kick April trading, worries of a pending recession continue to grow amongst traders and investors, breaking recent index uptrends. Still, I would not expect the bulls to give up easily, and after testing technical support, now would be the time to step up and defend. Unfortunately, they face another round of economic reports with PMI Mfg., ISM Mfg, Construction Spending, and mortgage and petroleum data. Once again, they are working to pump up the pre-market, so expect the wild intraday whipsaws to continue as the bulls and bears battle for directional control of the indexes.
After mainly ignoring the terrible durable goods report, the bulls surged higher by more than 350 Dow points, only the quick reverse taking most of it back in a considerable intraday whipsaw. The good news is last Friday’s index lows held as support, but facing another big day of earnings and economic data on this last trading day of February, expect more of the same wild volatility. A recession seems inevitable, with slowing economic reports stacking up evidence of changing consumer habits and record credit card debt with more rate increases on the way. So, plan your risk carefully as we slide into March and the market comes to grips with the challenging path forward.
Asian markets closed mostly higher but with modest gains and losses after Japan’s factory output fell. European markets edge slightly higher this morning despite the accelerating inflation in France and Spain. U.S. futures, once again, pump higher, the premaket facing a big day of earnings and economic data, but anything is possible by the open on this last trading day of February.
A bill to revise legal protections that have shielded TikTok from U.S. sanctions is expected to pass a key House committee on Tuesday, paving the way for a broader ban on the popular short video app. Sponsored by House Foreign Affairs Committee Chairman Mike McCaul, the bill would strip longstanding protections from companies that transfer Americans’ “sensitive personal data” to entities or individuals based in, or controlled by, China. The bill would likely pass the Republican-controlled House easily. However, its fate in the Democratic majority Senate is unclear.
After the U.S. shot down an alleged Chinese spy balloon this month, China’s defense ministry declined a call with its U.S. counterpart, according to statements from both sides. Chinese culture is why, said Shen Yamei, deputy director and associate research fellow at state-backed think tank China Institute of International Studies’ department for American studies. The default U.S. view is quite different.
Ukraine President Volodymyr Zelenskyy acknowledged Monday that the situation is deteriorating around Bakhmut. Russian forces and private military contractors belonging to the Wagner Group have been trying to capture Bakhmut for months as they look to cut Ukraine’s supply lines in Donetsk. On Monday, one Russian official claimed Russian forces now controlled all roads into Bakhmut, stopping Ukrainian supplies of ammunition and forces into the city.
We kicked off the week with a considerable intraday whipsaw, but despite the bearish reversal, the bulls defended last Friday’s index lows as support. TGT squeaked out an earnings beat this morning but appeared to have the same slowing consumer concerns as HD and WMT. We not only have a big day of earnings reports but also face several economic reports, including trade, PMI, Housing prices, and Consumer Confidence. Reversal and intraday whipsaws seem likely to continue to stay focused on support and resistance levels as the big point range of price swings on the last trading day of the month.
Thursday left more questions than answers with another whipsaw day, some hopeful hammer patterns just ahead of the Fed’s favored inflation number expected to rise according to consensus. To keep traders guessing, we will follow that up with New Home Sales, Consumer Sentiment, and more Fed jaw-wagging. Buckle up today’s data could encourage the bulls to defend support or inspire the bear to keep attacking as we head into the uncertainty of the weekend. Big price moves are possible, so plan carefully with critical technical and price levels in the index charts at stake.
Asian markets traded mixed during the night even as Japan’s inflation reached a 41-year high. European markets mixed, though cautiously waiting for market-moving economic reports. The hope hammer patterns of Thursday look to reverse with a gap down, showing ahead of the Personal Incomes and Outlay number that could change everything by the opening bell. Plan for big point moves as the reaction may determine who wins the battle to hold or break critical support levels.
We have a much lighter day on the Friday earnings calendar. Notable reports include BRC, CRI, GTLS, CNK, LAMR, SSSP, TBLA, & SLCA.
News & Technicals’
Block stock rose in extended trading after the payments company reported fourth-quarter revenue and gross profit that beat Wall Street’s expectations. The company posted a (non-adjusted) net loss of $114 million, or 19 cents per share, for the quarter.
According to Fidelity’s analysis, retirement account balances in 401(k) plans lost nearly one-quarter of their value in 2022. In addition, amid ongoing high inflation and economic uncertainty, nearly half of the retirees expect to outlive their savings.
Warner Bros. Discovery reported fourth-quarter revenue that missed analysts’ estimates as the media industry contends with a soft advertising market. However, the company, which owns HBO Max and Discovery+ streaming services, said its global direct-to-consumer streaming subscriber base increased by 1.1 million during the quarter. In addition, more “Lord of the Rings” movies are on the way, CEO David Zaslav said.
Fueled by NVDA earnings, the bulls tried to resume the upside rally in the day, but the attempt quickly faded into another whipsaw day that left behind some hopeful hammer patterns and yet more questions than answers. Interestingly yesterday’s volume spike was huge, and VIX registered a substantial decline in fear despite the big ship in price. This morning it’s all about the Personal Incomes and Outlays report, the Fed’s favored reading on inflation. The result is likely to set the direction for the day and determine if the bulls will resume directional control of the market or if the bears will gain the upper hand heading into the weekend. Plan for a bumpy ride with New Home Sales, Consumer Sentiment, and more Fed speak to keep traders on edge.
The Tuesday selloff was overdue, and although a bit painful, it was finally a recognition of the inflation and the resulting pressure the consumer is dealing with in putting groceries on the table. As a result, the indexes experienced some price action damage-breaking trends and current support levels, but only the DIA suffered the technical damage of breaking its 50-day average. Today we have a big round of earnings with the FOMC minutes later to provide some potential price volatility. However, traders will quickly turn their attention to the Thursday GDP report, and the Feds favored PCE number on Friday.
Asian markets followed the U.S., selling off across the board overnight as New Zealand hiked rates to a 14-year high. European markets also feel some selling pressure this morning, pulling back after recording recent record highs. With earnings results rolling out, the U.S. futures suggest a flat to slightly bearish open with last month’s FOMC minutes release later this afternoon. Expect the wild price swings to continue as the bulls and bears fight for control.
The maker of Jeep and Dodge, Stellantis, post a record annual profit. The company also announced a 4.2 billion euro dividend payout to shareholders, equating to 1.34 euros per share, subject to shareholder approval. At the same time, the board approved a share buyback of 1.5 billion euros to be executed by the end of 2023.
Amazon employees continued to sound off Tuesday night over the company’s recently announced return-to-office mandate. A group of staffers spammed an internal website with comments expressing anger over the policy. An internal Slack channel showed concerns about parenting, caregiving, and commuting.
Sweden’s Foreign Minister Tobias Billström told CNBC Sweden, and Finland’s NATO membership was “just a matter of time,” with negotiations with ratification holdout Turkey set to resume. Billström said Sweden had “worked to fulfill everything” it agreed to in a memorandum of understanding between the countries last summer, and Swedish membership at the NATO summit in July was the goal. Sweden requested to join the military alliance after 200 years of non-alignment due to the Russian invasion of Ukraine. But it is embroiled in a long-running dispute with Turkey, which holds veto power.
Though yesterday’s selling may have been a bit painful, it was way overdue and an acknowledgment that rates are likely to rise to add pressure to an already stressed consumer. Technically there was some damage to the DIA breaking below its 50-day average. Still, the Tuesday decline reduced the overextended conditions in the SPY, QQQ, and IWM, only suffering from the break of support levels in price action. Today we have a busy earnings calendar while we wait for the FOMC minutes that could provide some price volatility at the end of the day. However, traders will quickly focus on the Thursday GDP report and the Friday PCE numbers. Remember, one day does not make a trend, so it will be interesting to see if the bears have the energy to follow through with a downside push to test the 50-day averages in the SPY, QQQ, and IWM. I would not expect the bulls to give up quickly, so expect the wild price swings to continue as the battle for control continues.
The wild daily price swings continue as the bulls rush in to buy after the big morning gap lower, and this morning, it looks like we’re in for more overnight reversals and whipsaws. Home depot numbers point to a weakening consumer, making for dangerous conditions with the market trying to ignore the higher-than-expected inflation. But, of course, with emotions so high, perhaps the pending WMT report will patch up the overnight sentiment whipsawing us again. In addition, PMI, Existing Home Sales, and a slew of earnings reports will likely keep price action challenging.
Asian markets traded mixed overnight, reacting to factory activity as Putin ups his dangerous rhetoric as the war enters its 2nd year on the 24th of this month. As Credit Suisse continues to decline, with likely more Fed rate increases on the way, European markets began the day selling after recently notching record highs. With a big day of earnings reports with clues to consumer strength, PMI, and Housing data on tap, plan for more gaps and whipsaws.
We kick off this holiday-shortened trading week with a hectic earnings calendar. Notable reports for Tuesday include ARNC, BCRX, CZR, CHK, COIN, CBRL, FANG, ELAN, ESPR, EXPD, FLR, TWNK, HD, HUN, IR, KAR, KEYS, KTOS, LZB, LPX, MDT, MELI, TAP, PANW, PSA, O, SBAC, SKT, TOL, WMT, RIG, & ZIP.
News & Technicals’
Home Depot reported its fiscal fourth-quarter earnings before the bell. The home improvement retailer was a clear pandemic winner and has remained resilient despite inflation and consumer habits shifting. Home Depot said it would spend an additional $1 billion to raise hourly employees’ wages. The home improvement retailer is the latest to signal that the labor market is still tight. Walmart, the nation’s largest private employer, recently announced raising its minimum wage to $14 an hour for store employees.
Walmart will report its earnings before the bell. The big-box retailer will likely share its outlook for the year ahead. Investors and economists are eager for clues about the health of the American consumer as inflation remains high.
Western nations and Ukraine have repeatedly rejected Putin’s narrative. However, the U.S. administration on Saturday formally concluded that Moscow had committed “crimes against humanity” during its year-long invasion of its neighbor. Feb. 24 will mark one year since Russia mounted a large-scale invasion of Ukraine, beginning a ground war in Europe that Putin still calls a “special military operation.”
The wild daily price swings continued on Friday with a substantial gap down open, but the bulls quickly rushed in to buy the lows on relatively low volume as VIX registered declining fear. Unfortunately, as I write this report, futures suggest yet another pre-market reversal as disappointing HD earnings hint at a weakening consumer amid higher-than-expected inflation reports. With the DOW consolidating rage expanding to 800 points, nearly daily overnight reversals, and huge point intraday whipsaws, there is little to no edge to be had for the average retail traders. This wild price action is a paradise for the quick in and out day trader but be warned because such times can end swiftly and painfully if the euphoric bullish assumptions suddenly shift. With a big week of earnings and potential market-moving economic reports, expect more of the same in the days ahead.