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

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

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

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

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

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

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

Equity markets ended the day mixed but mostly higher with the DIA finishing lower while SPY and QQQ shook off some early selling to resume the push higher.  A strong showing on Netflix after the bell sets the stage for yet another gap to open the scoring tech sector.  Today we have Mortgage Apps, PMI, Petroleum, and bond auctions as well as a significant increase in earnings events so expect heightened price volatility as traders react.  Also, keep in mind we have the possibility of some big point moves with key economic data coming Thursday and Friday before the bell so carefully plan accordingly.

Overnight Asian markets closed mixed but mostly higher as Hong Kong surged 3.56% and the Shanghai exchange enjoyed a needed relief rally.  European markets are decidedly bullish this morning in reaction to PMI data showing an improvement in economic activity. The strong NFLX report after the bell yesterday sets up another gap open as index futures push higher ahead of earnings and economic reports.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include TSLA, ABT, AEM, AGI, AMP, APH, ASML, T, CP, CNS, COLB, CCI, CSX, ELV, ETH, FCX, GD, IBM, KMB, KNX, LRCX, MNRO, PKG, PLXS, RJF, RMD, SLM, SAP, STX, NOW, SLG, TEL, TEL, TDY, TXT, URI, WRB, & WFG.

News & Technicals’

Netflix warned its users and investors that it will increase its prices in the future, according to its quarterly investor letter. The company said that it needs to raise its prices to invest more in original and licensed content, as well as to improve its technology and user experience. Netflix also announced that it signed a deal to add 10 years of WWE’s Raw, a popular wrestling show, to its content library. Netflix has not changed the price of its ad tier, which costs $6.99 per month, since it introduced it in 2022. The company reported strong growth in its subscriber base in the fourth quarter of 2023. The company added 13.1 million new subscribers, beating its forecast of 11.5 million. The company now has 260.8 million paid subscribers worldwide, up 18% from a year ago. Netflix also exceeded Wall Street’s revenue estimates, posting $9.9 billion in revenue, up 21% year-on-year. The company attributed its success to its diverse and high-quality content offerings, as well as its global expansion strategy.

Despite surpassing market forecasts on both revenue and profit, ASML, the world’s leading supplier of lithography machines for chipmaking, warned that its sales growth would stall in 2024. The Dutch company, whose products are essential for producing the most advanced semiconductors, has been affected by the escalating tensions between the U.S. and China over technology trade and security. Earlier this month, ASML revealed that the Dutch government had restricted its exports of its latest NXT:2050i and NXT:2100i models to China last year, amid pressure from the U.S. to limit China’s access to cutting-edge chip technology.

The Federal Aviation Administration (FAA) has initiated a probe into Boeing’s aircraft manufacturing practices after a serious incident involving an Alaska Airlines flight. A door panel detached from the plane’s fuselage during the flight, causing a loud bang and a loss of cabin pressure. No one was injured, but the flight had to make an emergency landing. FAA Administrator Mike Whitaker said that the agency had sent several inspectors to Boeing’s factories to conduct a thorough examination of its quality control and safety standards. He said that the FAA was moving away from relying on Boeing’s self-audits and towards a more hands-on approach.

The stock market ended the day mixed but mostly higher, as the tech titans shook off early selling to resume the chase higher. The sectors of consumer goods and telecoms led the gains in the S&P 500, thanks to the impressive quarterly results of P&G and Verizon. The gap between the long-term and short-term Treasury yields widened today, as the 10-year yield climbed to about 4.14% and the 2-year yield dropped to 4.38%. Today the number of earnings ramped up significantly so expect some price volatility as traders react the the substantial amount of data. For the first time this week, we will also have the economic calendar providing some inspiration for the bulls or bears, with Mortgage Apps, PMI Composite, Petroleum Status, Business Uncertainty, and bond auction results. That said keep in mind Thursday morning brings us a slew of market-moving economic reports before the bell so plan your risk accordingly as big point moves are possible.

Trade Wisely,

Doug

Wanting to follow through with Friday’s record-breaking surge, Monday began with another substantial gap as the chase higher continues.  However, the momentum seemed to fad rather quickly with investors perhaps showing a little caution with key inflation data coming Thursday morning.  Today will be all about the earnings results as the number of reports ramps up which will capped by the highly anticipated Netflix report after the bell.  Be prepared as price volatility typically picks up during the bulk of earnings and there are some big point moves possible so plan carefully.

While we slept Asian markets reversed early losses to close mostly higher as China mulls a massive stock market rescue package as disinflation and consumer weakness grow.  European markets trade flat to slightly bearish this morning resting after recent gains.  U.S. markets also suggest a mixed but rather flat open coming off of overnight lows with a busy day of earnings ahead.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include NFLX, MMM, CNI, DHI, GE, HAL, ISRG, IVZ, JNJ, LMT, ONB, PCAR, PG, RTX, SYF, STLD, LRN, TECK, TXN, TRMK, VBTX, VZ, & WSBC.

News & Technicals’

China’s economic outlook is bleak, according to Shaun Rein, founder of the China Market Research Group, who has been living in China for 27 years. He told CNBC on Monday that he has never seen such low confidence among consumers and businesses in China. He predicts that China will go through at least another 3-6 months of economic hardship, as it struggles to rebound from the impact of Covid-19. China, the second-largest economy in the world, has failed to meet its growth expectations in 2023, despite lifting pandemic restrictions.

The Fed’s Office of Inspector General released a report on Monday that criticized the trading activities of two former regional presidents, Robert Kaplan of Dallas and Eric Rosengren of Boston. The report found that their trades, which involved stocks, bonds, and futures, created conflicts of interest that compromised their independence and integrity as central bank officials. The report also said that their actions violated the Fed’s code of conduct and ethics policies, and undermined the public’s trust in the Fed.

The SEC, the U.S. regulator of the securities markets, revealed that a SIM swap attack was behind the hacking of its official account on X, a social media platform. On Jan. 9, a hacker managed to take over the @SECGov account and posted a false message saying that the SEC had approved the first spot bitcoin ETFs, which are funds that track the price of bitcoin and trade on the spot market. The hacker was able to do this by swapping the SIM card of the phone number linked to the account and resetting the password. The SEC admitted that it did not have two-factor authentication enabled, which would have added an extra layer of security to the account.

The stock market kicked off the week bullish with another substantial gap up but then struggled to continue the upward perhaps acknowledging the uncertainty of the inflation data later this week. Bond yields have also nudged higher suggesting some concern and caution by investors about the pending Thursday data. The Nasdaq has gained about 2.0% since the start of the year, mostly due to the Magnificent 7 stocks (Apple, Microsoft, Google, Amazon, Tesla, NVIDIA, and Meta) which have increased by an average of 3.9%. However, the Russell 2000 small-cap stock index has fallen by over 3.0% this year, even though it had more strength at the end of 2023.  With very little to nothing on the economic calendar today investors will be looking to the growing list of earnings reports for inspiration.  The Netflix report will be of particular interest after the bell today.  Earnings typically mean a ramp up of price volatility so plan your risk accordingly.

Trade Wisely,

Doug

All that pushing and shoving by the tech giants finally got the job done as the S&P 500 broke out joining the DIA and QQQ with nothing but blue sky above. Unfortunately, the IWM does not benefit from big tech and continues to lag way behind the other indexes still in a short-term downtrend.  That said with a light day on the earnings and economic calendars I would expect the fear of missing out trade to push indexes higher.  However, keep in mind that the Thursday GDP and Friday Core PCE nears, bullish momentum could fade into some uncertainty ahead of the data.

Overnight Asian markets traded mixed with Japan hitting 33-year highs as China led the selling down 2.68%.  European markets started the week off bullishly mostly green following the Friday surge higher.  U.S. futures also point to bullishness wanting to extend the Friday break out with the tech titans leading the way with great anticipation of their pending earnings.

Economic Calendar

Earnings Calendar

Notable reports for Monday include AGYS, AGNC, BRO, IBTX, TFII, UAL, & ZION.

News & Technicals’

Buy now, pay later, a service that allows online shoppers to split their purchases into interest-free installments, boosted online sales to a new high during the holiday season, growing by 14% compared to the previous year. However, many consumers are facing difficulties in paying off their bills, as they are already burdened by record-high credit card debt and rising delinquency rates. The frequency of buy now, pay later defaults is not clear, but the users of the service are more prone to miss payments on other credit products, such as car loans or mortgages.

Moody’s Investors Service has a pessimistic view of the credit quality of APAC countries in 2024, as China’s economic growth decelerates and funding and geopolitical challenges increase. The credit rating agency said that China’s growth slowdown has a large impact on APAC economies, as they are closely linked to China’s role in global trade. It also said that the global liquidity situation, which depends on the Fed’s policy stance, is another factor that affects the credit outlook. The agency expects the Fed to keep its policy tight until the middle of the year, which could limit the availability of funds for APAC countries.

The new year has brought more job losses for many workers, even as the economic indicators show signs of improvement. Inflation has eased, unemployment has fallen, and recession fears have faded, but many big companies are still downsizing their workforce. However, the layoff strategies vary among different companies. Some companies are opting for a one-time, large-scale cut, while others are preferring a gradual, phased-out approach. The reasons for these different methods may depend on the company’s financial situation, industry outlook, and employee morale.

The stock market closed with a huge surge, as the S&P 500 broke out and finally reached a new all-time high joining the DIA and QQQ. However, the IWM continues to lag substantially behind without the benefit of the tech giants. The technology sector was the best performer, with semiconductor stocks boosting the sector after Taiwan Semiconductor Manufacturing Corp. (TSMC), a major chipmaker, posted better-than-expected results, and its shares jumped more than 6%. Today we have a very light economic calendar with a few notable reports but I would expect the fear of missing out on trade to continue this upside breakout at least until we get the next reading on the GDP on Thursday morning. Stay with the trend and enjoy the ride but keep in mind that valuations are very frothy so watch for hints of trouble along the path.

Trade Wisely,

Doug