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

The bears were a bit more active on Wednesday as rate uncertainty grew with hotter-than-expected retail numbers and Fed speeches continuing to suggest higher for longer than the market has anticipated. However, the SPY and QQQ left behind some hopeful candle patterns that a relief rally may be close at hand as long as earnings and economic data cooperate.  Investors will look for inspiration in the housing, jobless, manufacturing, oil and gas reports along with more Fed speeches and earnings.  Big point swings remain possible so plan your risk carefully.

While we slept Asian market ended mixed but mostly higher as Hong Kong relieved some of yesterday’s sharp selloff while China continued to linger near five-year lows. European markets are also taking a break from the recent selling showing green across the board this morning.  U.S. futures suggest a substantial gap in the Nasdaq though the Dow and SP-500 trade flat ahead of earnings and economic data.

Economic Calendar

Earnings Calendar

Notable reports for Thursday include OZK, FNB, FAST, FHN, HOMB, JBHT, KEY, MTB, NTRS, PPG, TCBI, & WNS.

News & Technicals’

Google’s CEO Sundar Pichai announced in a memo to employees on Wednesday that the company will reduce its workforce this year. Pichai said that the company has big plans in fields such as artificial intelligence and that it needs to invest more in these areas. He also said that to make room for this investment, the company has to make difficult decisions and cut some jobs. He did not specify how many jobs will be affected or which divisions will be impacted.

Apple has decided to scrap the blood oxygen feature from its newest Apple Watches, the company announced on Wednesday. The feature, which measures the oxygen level in the blood, was challenged by Masimo, a medical device maker, who claimed that Apple infringed on its patents. Apple said that by removing the feature, it will be able to keep importing the devices to the U.S. while the legal dispute is ongoing. The revised versions of the Apple Watch Series 9 and Ultra 2, which were launched in September, will be available for purchase on Thursday.

TSMC, the world’s largest contract chipmaker, saw its revenue and net income decline in the fourth quarter of 2023, compared to the same period a year ago. The company reported revenue of NT$625.53 billion, down 1.5% year-on-year, and net income of NT$238.71 billion, down 19.3% year-on-year. The company attributed the lower results to the global chip shortage, which affected its production and delivery. TSMC’s main customers include Apple and Nvidia, who rely on TSMC to make the most advanced processors for their products, such as the iPhones.

Rate uncertainty inspired the bears to be a bit more active as the markets ended the day in the red on Wednesday, extending Tuesday’s losses, but leaving behind some hope clues that a relief rally is possible soon. Investors seem to be adopting a more cautious stance on 2024 rate cuts and the geopolitical tensions that continue to grow. Rates rose on the day, following Fed Governor Waller’s speech which seemed to counter the market’s anticipation of imminent rate cuts. The 10-year yield has risen to 4.1% after beginning the year below 4%. Across the globe, stocks fell after data revealed weak growth in China and higher inflation in the U.K., while oil prices edged up and gold fell on the day. Today investors will look for inspiration in Housing Starts and Permits, Jobless Claims, Philly Fed Mfg., Natural Gas, and Petrolem figures.  We also have several notable earnings and more Fed member speeches to keep traders guessing.

Trade Wisely,

Doug

The indexes had a tough day on Tuesday as financial reports, rising bond yields, Fed remarks, and the huge miss on the Empire State numbers weighed heavily on investor sentiment.  Only the tech sector managed a positive close with just a small list of tech giants doing all the lifting.  Wednesday is chalked full of earnings and economic reports but with the China CPI miss slowing economic concerns look to start the day with some bearish uncertainty.  Watch for whipsaws with big point moves possible as investors react.

During the night Asian markets closed the day lower across the board with Hong Kong declining a whopping 3.71% and the Shanghai exchange falling near a 5-year low.  European markets are also decidedly bearish this morning with U.K. inflation rising.  U.S. futures suggest a bearish open but are already well off the overnight lows as we wait on retail sales data.  Buckle up, the morning session could prove quite volatile.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include AA, SCHW, CFG, DFS, FUL, KMI, PLD, SNV, USB, & WTFC.

News & Technicals’

China’s economic growth slowed down slightly in the fourth quarter of 2023, falling short of analysts’ forecasts. The GDP increased by 5.2% year-on-year, compared to 5.3% expected in a Reuters survey. The annual GDP growth rate was also 5.2%, the lowest since 1990. Retail sales, a key indicator of consumer spending, also disappointed, rising by 7.4% in December from a year earlier, below the 8% projection. China also resumed publishing the unemployment rate for young people, which stood at 13.1% in December, up from 12.9% in November.

Iran’s foreign minister issued a stern warning to the U.S. over its alliance with Israel, saying that it would be a mistake to link their future to that of Prime Minister Benjamin Netanyahu, who is facing corruption charges and political turmoil. He also blamed Washington’s unconditional backing of Israel for the instability and violence in the region, especially in Gaza, where Israeli airstrikes have killed hundreds of Palestinians. He urged the U.S. to “stop the war in Gaza” and respect the rights of the Palestinian people. He also emphasized that Iran was concerned about the security of the Red Sea, where it has a strategic interest and presence.

Tesla has lowered the prices of its Model Y electric SUVs in several European markets, following a similar move in China earlier this month. The company’s website shows that the Model Y prices in Germany have been reduced by up to 8.1%, while in France, the Netherlands, and Norway the prices have also been cut by varying amounts. The price cuts come as Tesla faces increasing competition from other automakers in the fast-growing electric vehicle market. Tesla’s stock price fell by 1.6% in the U.S. premarket trading on Tuesday.

The European Central Bank (ECB) is facing a dilemma as inflation in the eurozone hits a record high of 5% in December. While markets are pricing in aggressive interest rate cuts starting in the spring, some ECB officials are resisting such a move, arguing that it could be premature and counterproductive. One of them is Robert Holzmann, the governor of the Austrian central bank and a known hawk, who told CNBC on Monday that there were downside risks to the inflation outlook that could prevent any rate cuts this year.

Tuesday proved to be a tough day for the indexes, as earnings reports from financial firms and Fed remarks weighed on investor sentiment. The huge miss on Empire State numbers added a bit of uncertainty about a sharply slowing economy. Cyclical sectors, such as energy, industrials, and materials, underperformed, while tech was the only sector to end the day in the green all due to a very select few giant tech names. Global markets also declined, with Asian and European stocks closing lower. In Canada, CPI inflation increased by 3.4% year-on-year in December, matching expectations but exceeding the 3.1% rate in November. Bond yields rose, with the 10-year reaching around 4.05%, and the 2-year climbing to over 4.2%. The higher bond yields followed Fed Governor Christopher Waller’s statement where he said he did not see any need for the Fed to hurry into rate cuts.  Today we have a few more notable earnings with Mortgage Apps, Retail Sales, Import/Export Prices, Industrial Production, Business Inventories, Housing Market Index, Beige Book, and three Fed speakers to provide bullish or bearish inspiration.

Trade Wisely,

Doug

Friday closed with the Mag7 stocks working their magic to hold indexes while internally more stocks were declining rather than advancing.  Friday’s big bank reports produced mixed results but they will have another chance today to inspire the bull or bears with reports from the likes of GS and MS before today’s bell.  We will also get figures from Empire State Mfg., have some Fed speak as well as short-term bond auctions to inspire.  The geopolitical tensions in the Red Sea add considerable uncertainty looking forward so plan carefully.

Overnight Asian market closed mostly lower with only the Shanghai exchange eking out a small gain of just 0,27%.  European markets trade lower across the board this morning as they monitor ECB members talking about rate cuts at Davos.  U.S. futures point to a lower open though we have rallied significantly off the overnight lows as earnings results roll in. 

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include CVGW, FULT, GS, HWC, IBKR, MS, PNFP, PNC, & PRGS.

News & Technicals’

Vodafone and Microsoft have announced a 10-year strategic alliance to deliver cutting-edge AI, digital, enterprise, and cloud solutions to millions of customers in Europe and Africa. Vodafone will leverage Microsoft’s Azure OpenAI and Copilot technologies to create customer-centric AI applications and will migrate its data centers to the Azure cloud platform to reduce costs and increase efficiency. Microsoft will also take a stake in Vodafone’s IoT business, which will be spun off as a separate entity by 2024, and will support Vodafone’s expansion of its mobile money service in Africa.

Elon Musk, the CEO of Tesla and SpaceX, wants to increase his voting power over Tesla to 25%. He currently holds about 13% of the electric car maker’s shares. In a post on Monday, Musk said he felt uneasy about Tesla’s future as a leader in AI and robotics without having more say in the company’s decisions. Musk’s move comes after he and Tesla faced a lawsuit from shareholders in Delaware, who claimed that Musk’s 2018 compensation package was too generous and that the board that approved it violated its duty to the company.

The Allianz Risk Barometer, a report that assesses the most pressing risks facing businesses and societies, revealed that political risk reached its highest level in five years in 2023. According to the report, about 100 countries faced a high or extreme likelihood of civil unrest, such as protests, riots, or violence, due to social and economic grievances. The CEO of Allianz, Oliver Bäte, attributed this situation to the growing gap between the political elite and the working class, which he regarded as the biggest threat to social stability.

Chinese Premier Li Qiang urged the world to avoid using tech innovations as tools of geopolitical rivalry and containment. Speaking at the World Economic Forum in Davos, Switzerland, on Tuesday, Li said that the only way to foster healthy competition and unleash the potential of innovation was to enhance cooperation among countries. Li did not single out any country in his speech, but his remarks came amid the ongoing tensions between Beijing and Washington over technology issues. China has repeatedly called on the U.S. to lift its sanctions on Chinese firms that block their access to advanced technology from American suppliers. The U.S. has imposed these measures in the past two years, citing national security concerns and accusing China of using high-end semiconductors for artificial intelligence to boost its military power.

The week ended on a positive note though more stocks were declining than advancing, the effect of the Mag7 stocks. The S&P 500 gained 0.1% and the Dow lost 118 points with UnitedHealth’s leading the selling, as we slide into the uncertainty of a three-day weekend.  In the commodities markets, gold and oil prices increased, as geopolitical tensions escalated and bond yields moved higher. The big bank reports produced mixed results on Friday but with several more coming our way this morning be prepared for just about anything.  We will also have to keep an eye on reports coming out of Daovs as the so-called political elite pontificates the future rest of us, underlings.  Along with earnings we have Empire State numbers, Fed speaks, and bond auctions for the bulls or bears to find inspiration as we begin this holiday-shortened week.

Trade Wisely,

Doug

As expected the price action reflected uncertainty as the market waited for the release of the CPI inflation data coming out before today.  With the market uber-confident, the Fed will begin cutting rates early this year expect substantial price volatility as traders react.  There is a lot of blue sky above if the number is bullish but should it prove not to be so bullish be prepared because big point-down moves are also possible.  Remember as soon as we are past the morning reaction the market will quickly shift its gaze toward Friday and the big bank report along with a reading on the PPI with a 3-day weekend just beyond.  Plan carefully!

Overnight Asian markets closed mostly higher with Japan continuing to surge closing above 35K.  European market trade this morning with cautions bullishness waiting on the U.S. data. Futures in the U.S. also suggest a cautiousness pointing to a flat open but that will quickly change after the data is revealed. Anything is possible so be prepared at the market reacts.

Economic Calendar

Earnings Calendar

Notable reports for Thursday are only INFY.

News & Technicals’

The consumer price index (CPI), a measure of inflation, is expected to have increased by 0.2% in December 2023, bringing the annual inflation rate to 3.2%. This is higher than the Fed’s target of 2% but lower than the peak of 4.5% in June 2023. The Fed has signaled that it will cut interest rates twice in 2024, but the market is pricing in four rate cuts, reflecting a more pessimistic outlook for the economy. The Fed faces a delicate balance between easing too much and risking higher inflation, or easing too little and triggering a recession that many economists have been warning about.

Citigroup’s fourth-quarter earnings will be hit by two major factors: the plummeting value of the Argentine peso and the cost of streamlining its operations. The bank revealed on Wednesday that it suffered $880 million in losses from converting its assets in Argentina to U.S. dollars, as the peso fell by more than 40% in 2023. It also incurred $780 million in expenses related to CEO Jane Fraser’s plan to simplify the bank’s structure and reduce its global footprint. These charges are much higher than the $400 million that CFO Mark Mason had estimated at a Goldman Sachs conference in December. Citigroup will report its fourth-quarter results on Friday morning.

The U.S. Securities and Exchange Commission (SEC) has given the green light to the first bitcoin exchange-traded fund (ETF) in the country. This is a historic moment for the cryptocurrency industry, as it signals the growing acceptance and legitimacy of Bitcoin as an asset class. The approval will pave the way for the Grayscale Bitcoin Trust, the largest holder of Bitcoin with $29 billion in assets, to convert into an ETF and offer investors lower fees and greater liquidity. Other major financial institutions, such as BlackRock and Fidelity, are also expected to launch their own Bitcoin funds in the near future.

Germany is facing a severe transport crisis as train drivers stage a three-day strike over pay and working conditions. The strike, which began on Wednesday and will last until Friday evening, has paralyzed rail services across the country, affecting millions of commuters, travelers, and businesses. The strike comes amid ongoing protests by farmers who are unhappy with the government’s agricultural policies and environmental regulations. Some analysts have compared the situation to a general strike, the likes of which Germany has not seen since 1906. The economy minister, Peter Altmaier, was confronted by angry demonstrators last weekend and had to be escorted by security guards. The social unrest reflects the growing dissatisfaction and frustration among various sectors of German society.

As the market waited for the CPI data, U.S. stocks edged up, except for small-caps which fell slightly in a choppy session. Back in the U.S., the Magnificent 7 (Apple, Amazon, Alphabet, Meta, Microsoft, NVIDIA, and Tesla) continue doing the majority of the work with NVIDIA leading the pack. The efforts of the tech giants may finally achieve an all-time high breakout in the SPY as long as the pending inflation data corporates.  Before the bell watch for some price volatility with the release of the CPI report and Jobless Claims. The potential for big point moves is high and watch for whipsaws after the first knee-jerk reaction to the data.  Past that we have some bond auctions and more Fed speak to be aware of in the afternoon.  Keep in mind the market thinking will quickly shift to the Friday PPI report and kick off to the earnings session with several big bank reports before sliding into a 3-day weekend.

Trade Wisely,

Doug

Markets finished mostly lower in a choppy Tuesday session as CPI uncertainty ruled the day.  The QQQ outshined the rest with the tech giants providing the majority of the bullish effort.  Optimism grew among businesses yet remains below the 50-year average of 98.8 continuing to indicate small business uncertainty.  Today investors will look for inspiration in Mortgage Apps, Inventories, Petroleum Status, and Fed speak as we hurry up and wait on Thursday’s CPI report.  A lot is riding on this inflation report with so much bullish sentiment so plan carefully as big point moves are possible before the market opens tomorrow.

While we slept the Nikkei broke the 34,000 level for the time since 1990 while at the same time, the Chinese CSI 300 declined to near 5-lows as Asian markets closed the day mostly lower.  European markets trade mostly lower this morning with modest gains and losses in a caution session waiting on inflation data. However, U.S. futures are mixed this morning the Nasdaq leading the way higher as the tech giants dominate buying interest. 

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include only, KBH.

News & Technicals’

X, a social media platform, said on Tuesday that it has finished a preliminary investigation into the hacked account of the U.S. Securities and Exchange Commission (SEC) that showed a fake post. The post claimed that the SEC was investigating a major company for fraud. X said that the hack was not caused by any flaw in X’s systems, but by an unknown person who gained access to a phone number linked to the @SECGov account through another service. X said it has taken steps to secure the account and prevent further incidents.

A major attack by Iranian-backed Houthi rebels on commercial ships in the Red Sea has triggered a response from the U.S. Navy, which has deployed four warships from Operation Prosperity Guardian to the area. The operation is a maritime security mission that aims to protect the vital waterway from Houthi threats. According to CNBC, about 50 merchant vessels are in the vicinity of the attack, which is the largest of its kind by the Houthi militants. The attack poses a serious risk to global trade and stability in the region.

HPE, a technology company that provides hardware, software, and services, announced on Tuesday that it will buy Juniper Networks, a network equipment maker, for $14 billion in cash. The deal will expand HPE’s portfolio of networking products and solutions, and strengthen its position in the cloud and edge computing markets. Juniper’s stock soared on Tuesday after the Wall Street Journal reported on Monday night that the deal was imminent. HPE is paying $40 per share for Juniper, which is 32% higher than Juniper’s closing price on Monday before the news broke.

Uncertainty ruled the day on Tuesday as stocks ended mostly lower, as investors look ahead to the December CPI inflation data and the Friday kick-off of earnings season. The Nasdaq did better than both the S&P 500 and Dow Jones with the tech giants doing most of the lifting. The NFIB Small Business Optimism survey rose a bit for December to 91.9, but was still lower than its 50-year average of 98.0, showing that small business confidence is low. Meanwhile, WTI crude oil recovered, rising over 1.5% to around $72, after falling over 4% on Monday, as oil markets faced more geopolitical and supply challenges. Today it’s likely more of the same hurry-up and wait choppy price action with a chance Mortgage Apps, Inventories, Petroleum Status, and more Fed pontification could provide some bullish or bearish inspiration.  With so much bullish sentiment a lot is riding on tomorrow’s CPI number so plan your risk carefully as big price moves are possible before the bell.

Trade Wisely,

Doug

The Employment Situration report continues to not only indicate a strong labor market along with rising wages raised some worries about inflation as the dollar rallied and the 10-year bond yield rose back above 4%.  We kick off the new week with a light earnings and economic calendar and it pretty much stays that way until until Thursday we we get the next reading on CPI. So as we hurry up and wait don’t be surprised to see just about anything in the price action including range bound chop as we wait in anticipation. 

Asian markets closed the day mostly lower with the tech heavy Hong Kong leading the selling down 1.88% followed by Shanghai down 1.42%.  Europeian markets trade mostly lower this morning with modest gains and losses in a cautious session waiting on pending inflation data.  However, the U.S. futures point to a mixed open with as tech tries to bounce back with Dow under pressure due to the bad news for Boeing. 

Economic Calendar

Earnings Calendar

Notable reports for Monday ACCD, HELE, & JEF.

News & Technicals’

Boeing, the aerospace giant, saw its shares plunge 8% in pre-market trading at 4:30 a.m. ET on Monday. The drop came after the Federal Aviation Administration (FAA) issued an emergency order on Saturday, requiring 171 Boeing planes around the world to undergo inspections before they can fly again. The order was triggered by an incident on Friday, when an Alaska Airlines flight suffered a blowout in one of its engines, forcing it to make an emergency landing. The National Transportation Safety Board (NTSB) is investigating the cause of the engine failure.

Audacy, a leading company in radio and podcasting, has announced that it will file for Chapter 11 bankruptcy protection to deal with its heavy debt burden. The company said that it has reached a restructuring agreement with its creditors, which will enable it to cut its total debt by 80%, from about $1.9 billion to about $350 million. The company said that the bankruptcy process will not affect its operations or its content offerings.

A $1.59 trillion spending deal was reached by congressional leaders on Sunday, as the government tries to prevent a possible shutdown. The deal sets the overall budget for the 2024 fiscal year, dividing $1.59 trillion between defense and non-defense spending, with $886 billion for the former and $704 billion for the latter. The deal shows that Johnson and Schumer, the leaders of the Senate, are cooperating, but it does not guarantee a funding agreement, as there are still policy disputes between the parties.

Cosco, a Chinese state-owned shipping company, has stopped its services to Israel via the Red Sea, amid rising conflicts in the vital waterway. The Red Sea connects the Mediterranean Sea and the Indian Ocean, and is a key route for global trade. Israeli state media reported that Cosco’s decision was based on security concerns, but did not reveal any further details. According to Globes, an Israeli financial news source, Cosco’s move could affect Israel’s imports and exports.

On Friday The U.S. employment data revealed a strong labor market, causing major indexes to swing between ups and downs. Job growth picked up, boosting the economy, but wage growth was higher than expected, raising inflation fears. The 10-year Treasury yield rose above 4%, hurting the defensive sectors, which are more affected by interest rates. However, today’s market changes were not very significant, and despite stocks finishing the first week of the year lower, only slightly correcting from the parbolic nine week bullish run. The FAA grounding sozens of 737 Max9s aircraft has the market feeling a bit bearish but little on the earnings and economic calendar anything is possible.  In fact as we continue to wait for the official kickoff of earnings and the CPI and PPI reports later this week traders should consider the possibility of choppy range bound consolidations through mid week. 

Trade Wisely,

Doug

Yesterday reminded us that bears still exist with the sharp drop at the end of the day that cascaded into traders running for the door to protect profits.  Perhaps the quick selling also indicated an acknowledgment of the very overextended condition of the indexes as well as buyer exhaustion. Today as we run through a handful of notable earnings reports along with GDP, Jobless Claims, and the Philly Fed Mfg. numbers plan for an extra dose of price volatility due to the added uncertainty. Big point swings are possible and remember volumes could quickly decline as folks head out for holiday plans.

Asian markets closed the day mixed but mostly lower with the HSI and Shanghai recovering just slightly from the earlier selloff.  However, European markets traded red across the board perhaps also recognizing the extended condition of the indexes.  U.S. futures work to shake off yesterday’s selling indicating another gap up open trying to keep the exuberant buying spree going ahead of market-moving data.  Buckle up it could be a wild morning of emotional price action.

Economic Calendar

Earnings Calendar

Notable reports for Thursday AIR, APOG, AVO, CCL, CTAS, NKE, & PAYX.

News & Technicals’

Citigroup, one of the largest banks in the world, is shutting down its global distressed-debt unit, according to CNBC. The unit, which traded bonds and loans of companies in financial trouble, was part of the bank’s markets division. The move is part of a broader restructuring plan by Citigroup’s CEO Jane Fraser, who took over in February. Fraser is aiming to improve the bank’s profitability and efficiency by exiting low-performing businesses and focusing on its core strengths.

Toyota, the world’s largest automaker, saw its shares drop sharply on Thursday after it announced a massive recall of about a million vehicles in the U.S. The recall affected certain 2020-2022 models of Toyota and Lexus, its luxury brand, due to a potential defect in the fuel pump that could cause the engine to stall. The recall was the latest in a series of quality issues that have plagued Toyota in recent years, denting its reputation for reliability and safety.

China has announced that it will impose tariffs on 12 chemical compounds imported from Taiwan, starting from Jan. 1, 2024. The move is seen as a punitive measure against Taiwan, which Beijing accuses of breaching a trade agreement. The affected chemical compounds include vinyl chloride, dodecyl benzene, and ethylene-propylene copolymer, which are used in…

The U.S. military said it intercepted 14 drones that were launched by the Houthi rebels from Yemen in the Red Sea over the weekend. The drones were part of a coordinated attack on shipping lanes in the strategic waterway, which connects the Mediterranean Sea and the Indian Ocean. The attack prompted many tankers and cargo ships to avoid the Suez Canal, which is the shortest route between Europe and Asia, and take the longer and more costly route around Africa. The Houthi rebels, who are backed by Iran, have threatened to target Israeli ships and any ships that are linked to Israel, in response to Israel’s war with Hamas in Gaza.

U.S. stocks ended Wednesday with a sharp drop as traders ran for the door in unison to protect profits in this very extended market condition. The S&P lost 1.5% and the Dow fell 476 points. The decline began with no trigger other than perhaps some exhaustion after the strong rally in the past few weeks. As a result, traders should plan for an extra dose of price volatility that could create some big point whips due to the uncertainty. Expect the GDP, Jobless Claims, and Philly Fed data to add to this morning’s emotional price sensitivity as well as the handful of notable earnings.  Keep in mind after the reaction to data volume could decline into a choppy afternoon as traders extend holiday plans.

Trade Wisely,

Doug

The bulls tacked on more gains Tuesday as the Fed pivot bet continued to inspire the fear of missing out as the DIA and QQQ inked the 9^th straight day of gains. Bond yields continued to decline while oil, one of the main contributors to the decline in inflation continued to rally as the Middle Eastern war spilled out into the Red Sea threatening the supply chain. Today traders have a handful of notable earnings along with Consumer Confidence, Existing Home Sales, and Petroleum figures to digest. Remember volumes could soon begin to decline as holiday vacations begin and keep in mind we could see a hurry-up wait choppy afternoon with the GDP report Thursday morning.

While we slept Asian market mostly gained in reaction to the dovish decision from the BOJ, though Shanghai declined after a hold of benchmark lending rates. Across the pond, European markets trade mixed but mostly higher with modest gains and losses a day after the FTSE inked a three-month high.  However, U.S. futures suggest a modestly bearish open to being Wednesday ahead of earnings and economic reports.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday BB, GIS, TTC, MLKN, & WGO.

News & Technicals’

FedEx, the global delivery giant, saw its shares drop 9% after it reported disappointing results for its fiscal second quarter. The company missed analysts’ expectations for both revenue and earnings, as it faced lower demand for its Express service, which accounts for more than half of its sales. The company also cut its guidance for the full year, citing challenges from the pandemic, labor shortages, and supply chain disruptions.

A study by Lending Tree revealed that Tesla drivers had the highest accident rate in the U.S. in the past year, with 24 accidents per 1,000 drivers from mid-November 2022 to mid-November 2023. Tesla drivers were followed by Ram and Subaru drivers, who also had high accident rates. The study also found that BMW drivers were the worst offenders when it came to driving under the influence, with 3 DUIs per 1,000 drivers in a year, which was double the rate of Ram drivers, who ranked second in this category. The study warned that accidents, DUIs, speeding, and other violations could result in higher insurance premiums for drivers.

U.S. Bank, one of the largest banks in the country, faced a hefty penalty of almost $36 million from federal authorities for breaking consumer protection laws. The bank blocked access to prepaid debit cards for hundreds of thousands of people who relied on them to receive unemployment benefits during the Covid-19 crisis. The bank also received a separate fine of $15 million from the Office of the Comptroller of the Currency, which oversees national banks.

The former CEO of Stimwave Technologies, Laura Tyler Perryman, is facing charges from the SEC for allegedly scamming investors out of $41 million. According to the SEC, Perryman lied about one of Stimwave’s products, claiming that it had FDA approval when it did not. The SEC’s lawsuit comes after Perryman was criminally indicted by the U.S. Attorney’s Office in New York in March for the same scheme.

The equity markets extended the positive streak from the previous weeks as the Fed pivot bet continues to inspire the bulls to play chase. The main economic data that investors watched were U.S. housing starts and Canadian CPI inflation. U.S. housing starts beat expectations by increasing more than 14% from the previous month, while Canadian CPI inflation was slightly higher than anticipated. The market was led by a mix of sectors, with both growth sectors like communication services and cyclical sectors like energy and materials doing well. IWM continued to play catch up, surging 2% on Tuesday and has now risen about 20% since October 31. Oil prices continued to climb, reaching over $74 per barrel as the Red Sea tensions added risk to the supply chain. Today bulls and bears will look for inspiration in Mortgage Apps, Current Accounts, Consumer Confidence, Existing Home Sales, Petroleum Status, and a 20-year bond auction.  We also have a handful of notable earnings to keep traders guessing.  Keep in mind that volume could begin to drop quickly after the morning reaction to data as traders begin holiday vacation plans and wait for the Thursday GDP report.  Plan carefully.

Trade Wisely,

Doug