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

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