Hot PPI Number

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Hot PPI Number

The hot PPI number didn’t dissuade the bulls from holding the morning gap, feeling the relief of the Russian troop pullback.  But, unfortunately, according to NATO, the news of a withdrawal was nothing more than a ruse.  Yesterday’s relief rally was nice, but the overhead price resistance levels remain, as does the overall downtrend in the indexes.  Expect price action to remain challenging with a hectic day of economic and earnings data coming our way.  So plan your risk carefully with the vast uncertainty ahead.

While we slept, Asian markets rebounded, led by the Nikkei up 2.22% even as China’s inflation came in hotter than expected.  However, with Russia-Ukraine tensions rising, European markets traded mixed and cautious.  With critical economic data and earnings reports before the bell, U.S. futures point to flat open when writing this report.  However, traders should prepare for just about anything at the open.

Economic Calendar

Earnings Calendar

We have a busy Wednesday with about 170 companies listed on the earnings calendar.  Notable reports include SHOP, ALB, ALKS, ATUS, AMCK, CRMT, AIG, AWK, ADI, AMAT, GOLD, SAM, CAKE, CSCO, CDE, COWN, CROX, DASH, ET, EQIX, FSLY, FSR, GRMN, GRNC, HLT, HST, H, INFN, KHC, MGY, MRO, MMLP, NE, NUS, NTR, NVDA, OC, PXD, R, SBLK, SUN, SNPS, TTD, TRIP, VECO, VMC, & WING.

News & Technicals’

NATO has accused Russia of increasing its troop count at the Ukrainian border a day after Moscow claimed it had begun withdrawing some of its military units.  NATO chief Jens Stoltenberg said Wednesday, “it appears that Russia continues their military buildup” at the border.  U.K. Prime Minister Boris Johnson said Wednesday that the Kremlin is sending the West “mixed signals.”  Many energy analysts say that Brent surpassing $100 a barrel is almost a given at this point.  An increasing number of forecasters predict the commodity surpassing $125 a barrel and even higher.   Money is pouring into investments in oil-related stocks, and international oil companies are raking in record profits.  The Energy Information Administration lowered its OPEC capacity estimates by 300,000 barrels per day in February.  The role of PR companies in preventing climate action has typically been overlooked, in large part because communications firms have sought to remain in keeping with the PR adage that “the best PR is invisible PR.”  However, comprehensive academic research quantifying the PR industry’s role in climate politics has been followed by pressure from external campaign groups, scientists, and environmental activists.  Now, the prospect of U.S. congressional hearings is likely to turn up the heat even further.  Airbnb beat Wall Street estimates on earnings and revenue in its fourth quarter.  The company reported 73.4 million nights and experiences booked in the fourth quarter, down nearly 8% from the prior quarter and missing estimates.  Airbnb expects its first-quarter 2022 nights and experiences booked to exceed Q1 2019 levels significantly.  Treasury Yields trade mixed in early Wednesday trading with the 10-year trading at 2.0469% and the 30-year declining slightly to t2.3550%.

Although it looks as if the Russian pullback of troops was misinformation and a hot PPI number continued to show rising inflation, the bulls were able to matain the gap throughout the day.  Today will turn our attention to Retail Sales figures, Import-Export Prices, Industrial  Production, Petroleum Statis and the FOMC minutes.  We also have a big day of earnings to keep the volatility high and traders guessing with AMAT, CSCO, and NVDA reporting after the bell.  Although the relief rally was nice little, if anything changed in the technical picture of the indexes with significant overhead price resistance and downtrends holding.  I suspect there will be a lot of eyes on the Retail numbers this morning with consumer sentiment at such low levels.  Again, prepare for volatile price action and respect price resistance with the downtrend market conditions.

Trade Wisely,

Doug

Rumors and Speculation

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On Monday, index price action surged and fell violently as rumors and speculation swirled over a Russian invasion.  However, after hearing that Russia is sending some troops back home, futures point to another overnight reversal.  So could we see a short squeeze, a big whipsaw, or a pop and drop this morning with another PPI reports expected to come in hot.  Your guess is as good as mine as this emotional market swings wildly.  So, plan your risk carefully and keep a close eye on overhead price resistance.

Asian markets traded mixed but mainly lower overnight due to geopolitical tensions.  However, hearing the news of a partial troop drawdown, European markets trade decidedly bullish this morning.  U.S. future also points to a substantial overnight reversal ahead of PPI data and a busy earnings day.  So prepare for another day of wild price action from this emotionally charged market.

Economic Calendar

Earnings Calendar

The Tuesday earnings calendar ramps up the reports, with around 130 companies fessing up to quarterly results.  Notable reports include AKR, ABNB, AKAM, ANDE, ANGI, BWA, CEVA, CF, CINF, CRK, DENN, DVN, FELE, GXO, HSIC, HUN, IAC, IQV, LZB, MAR, PACB, QSR, RSLX, SEDG, UPST, VIAC, WH, WYNN, & ZTS.

New & Technicals’

The Russian government has announced that Moscow is beginning to return troops at the Ukrainian border to their bases.  Igor Konashenkov, a spokesman for the Russian Ministry of Defense, said troops recently posted along the border with Ukraine had begun moving back to their military garrisons.  Timothy Ash, the emerging markets senior sovereign strategist at BlueBay Asset Management, said the move could signal a significant defeat for Putin.  As a result, global attention is focused on Russia and whether President Vladimir Putin will order an invasion of Ukraine.  Until earlier this month, China had been mostly silent as tensions have risen between NATO and Russia.  In 2021, global semiconductor industry sales reached a record $555.9 billion, up 26.2% year on year, the U.S.-based Semiconductor Industry Association (SIA) said.  In addition, the SIA said that they expect demand to “rise significantly” in the coming years.  China remained the biggest market, with sales totaling $192.5 billion in 2021.  St. Louis Fed President James Bullard told CNBC on Monday that he thinks the Fed needs to push interest rates up quickly.  “Our credibility is on the line here,” he said as he advocated for a rapid interest rate increase of a full percentage point.  This year, markets have begun pricing in seven rate hikes since Bullard first made his hawkish position known last week.  Treasury Yields moved higher in early Tuesday trading, with the 10-year rising to 2.0294% and the 30-year moving up to 2.3277%. 

As rumors and speculation swirled around about a Russian invasion, index prices proved to be very volatile on Monday.  The wild price moves continued overnight, with some troops leaving the border, raising hopes of a de-escalation of tensions.  The next hurdle for the market to cross is the PPI report that many suspect will come in hot, adding to inflationary concerns and pressuring Fed to act aggressively.  Along with the big day of inflation data, we have a large group of earnings reports adding to the potential price volatility.  The significant overnight reversal could trigger a short squeeze this morning, but with so much data coming our way, traders will have to also watch for the possible pop and drop or large point whipsaws.  Market emotion is high, so be prepared for almost anything and remember the Retail Sales figures could add to the wild price gyrations with low consumer sentiment.

Trade Wisely,

Doug

Consumer Sentiment Falls

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As if the hotter than expected inflation was not enough, the sharply declining consumer sentiment report came along to kick the market while it was down on Friday morning.  The threat of Russian invasion only adds to the uncertainty keeping the price volatility high waiting for the next shoe to drop.  The PPI report on Tuesday, Retail Sales, and FOMC minutes Wednesday, with housing data later in the week, also clouds this week’s path forward.  We have a few potential market-moving as we progress through the week to add to the highly emotional price action likely in the week ahead.

Asian markets closed mostly lower, with the Nikkei leading the selling down 616.49 points or -2.23%.  This morning, European markets trade decidedly bearish with red across the board and the DAX and CAC down 3% or more.  In addition, U.S. futures that opened traded last night trying to put on a brave face now point to a gap down open with Russia-Ukraine tensions and Fed rate hikes, worrying both traders and investors.  As a result, expect price volatility to remain challenging throughout the week.

Economic Calendar

Earnings Calendar

We have around 100 companies listed, with many unconfirmed to begin the new trading week.  Notable reports include AAP, ALX, AMKR, ANET, CAR, CLR, KRG, OTTR, SRG, VNO, WEBR.

News & Technicals’

On Sunday evening, Ukrainian Foreign Minister Dmytro Kuleba said that Ukraine had requested a meeting with Russia within 48 hours.  German Chancellor Olaf Scholz will hold talks with the presidents of Ukraine and Russia on Monday and Tuesday.  U.S. national security advisor Jake Sullivan told CNN on Sunday that a Russian attack on Ukraine could happen this week.  Every indication suggests that Putin continues to build up troops at the border Russia shares with Ukraine, said Michael McFaul, a former U.S. ambassador.  “There’s no indication at all that Putin has stopped his march towards war, his preparedness towards war,” said McFaul, who is now a director at the Freeman Spogli Institute for International Studies.  However, there remains a lot of uncertainty over what will happen with Ukraine because Putin is “isolated” and rarely speaks to his advisors.  The Federal Reserve should be measured in its path to raise interest rates, San Francisco Fed President Mary Daly said Sunday.  “History tells us with Fed policy, that abrupt and aggressive action can actually have a destabilizing effect on the very growth and price stability we’re trying to achieve,” Daly said.  Daly supports the Fed raising rates in March and said “it’s too early to call” how many times the central bank will hike rates this year.  Treasury Yields moved slightly lower in early Monday trading, with the 10-year pricing at 1.9371% and the 30-year dipping slightly to 2.2399%.

The hotter than expected inflation coupled with the sharply declining consumer sentiment brought out the bears Friday, creating lower highs and breaking support levels in the index chart.  Unfortunately, the Russian / Ukraine tensions only add to the uncertainty of the path forward in the market.  In this week’s economic calendar, we have PPI, Retail Sales, FOMC minutes, and housing data that will likely keep price volatility high and uneasy traders guessing.  At this point, we can not rule out a retest of the January low intraday whipsaws and overnight reversals.  We still have a few potential market-moving earnings reports this week that could inspire the bulls, but if Russia invades, all bets are off, and anything is possible.  A dangerous market condition may be an understatement, so if you plan to trade, plan carefully and be willing to take any profits quickly because they could easily evaporate in the subsequent price gyration.  Having an edge as a swing or position trader could be slim to none, while experienced day traders could have the upper hand as the market searched for clarity.

Trade Wisely,

Doug

50 Basis Point?

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50 Basis Point

After the very disappointing read on inflation, the market is facing the very real possibility of a 50 basis point rate increase at the March FOMC meeting.  This morning we will get the Consumer Sentiment number after the open, with a lighter day of earnings events to supply some levity.   Today, the bulls will have a tough job as they try to defend the recent higher lows in the indexes as we head toward the weekend with tensions rising on the Ukrainian border.  The technical picture took substantial damage yesterday, but it could worsen quickly if we lose this critical support level.

Asian markets closed their Friday session mixed, but mostly lower, and European markets see red across the board as the world reacts to the likely consequences of rising inflation.  Likewise, U.S. Futures point to a lower open ahead of a lighter day of earnings events and a temperature reading on consumer sentiment.  Plan your risk wisely as we head into the weekend with tensions rising on the Ukrainian border.

Economic Calendar

Earnings Calendar

As usual, the Friday earnings calendar gives us a little break with less than 60 companies listed, and a number of those are unconfirmed.  Notable reports include AXL, APO, ARES, CLF, D, ENB, FTS, GPRE, GPP, MGA, NWL, UAA, & WPC.

News and Technicals’

The latest U.S. January inflation data came in like a “punch in the stomach” for the Federal Reserve, said the chief global economist of Citi Research, Nathan Sheets, adding that means the next rate hike could be as aggressive as 50 basis points.  According to the labor department, the U.S. consumer price index for January surged to 7.5% year-over-year.  In addition, both headline and core CPI rose 0.6%, compared to estimates for a 0.4% increase by both measures.  “These inflation data today came like a punch in the stomach for Jay Powell and his colleagues,” Nathan Sheets told CNBC’s “Squawk Box Asia” on Friday.  Adding to the market pressure, President Joe Biden has issued a warning that U.S. citizens should leave Ukraine immediately as tensions with Russia over its military activity intensify.  Secretary of State Antony Blinken also urged Americans to leave Ukraine on Friday, warning “an invasion could begin at any time.”  Meanwhile, British Prime Minister Boris Johnson warned on Thursday: “Things are as dangerous as I have seen them in Europe for a very, very long time.”  CEO Steve Cahillane told CNBC on Thursday that Kellogg may cover higher input costs due to skyrocketing inflation with higher prices and productivity.  “We don’t want prices to get too high, but we’re in an environment where it’s broad-based, it’s across everything, but we’ve been able to cover it.  Our pricing performance has been very solid,” he said.  Cahillane said that price elasticity has been at historic lows, but Kellogg still plans to be cautious about raising prices this year.  California’s Department of Fair Employment and Housing says it conducted a three-year-long investigation and received hundreds of complaints from Tesla workers.  The agency says it found evidence that Tesla routinely kept Black workers in lower-level roles, assigned them more physically demanding work, and retaliated against them when they complained about racist slurs on the assembly line.  The agency is seeking unspecified damages and for the company to reinstate workers who were unfairly terminated.

The 10-year dipped just one basis point in early Friday trading holding at 2.0119% as the market now anticipates an FOMC rate increase of 50 basis points at the March meeting.  After the disappointing read on inflation, the 2-year Treasury yield surged 26 basis points, the biggest single-day move in since 2009.  The report also showed the 4th straight decline in real incomes to add insult to injury.  The resulting market selloff created technical damage as the Dow, for the second time, failed its 50-day average.  The SPY reversed with still under its 50-day, and the QQQ failed below its 200-day, further complicating the technical picture.  However, there is still hope that the recent higher low in the indexes could hold as support if the bulls can find the energy to defend.  Let’s hope the reading on Consumer Sentiment at 10 AM Eastern today doesn’t kick us while we’re down with another decline.  With the Whitehouse calling for all Americans to leave Ukraine due to rising tensions, the bulls will have their work cut out for them as we head toward the weekend.

Trade Wisely,

Doug

CPI Report

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CPI report

Although the Wednesday rally was nice this morning, traders and investors now hold their breath for the CPI report.  Consensus estimates suggest inflation increased in January and may come in at more than a 40-year high!  If true, will that push the FOMC to act more aggressively in the March meeting, raising the interest rate by 50 basis points?  Toss in a slew of earnings reports, and the stage is set for another day of challenging price action.

Overnight Asian markets closed green across the board with relatively modest gains waiting on the inflation data.  European trade mixed but mostly higher with all eyes on the U.S. ahead of the CPI report.  U.S. futures traded mixed ahead of critical inflation data and a bevy of earnings reports likely to keep traders guessing and price volatility high on Thursday.   So, let’s get ready to rumble.

Economic Calendar

Earnings Calendar

We have another big Thursday on the earnings calendar, with about 210 companies expected to report throughout the day.  Notable reports include KO, AFRM, MT, AZN, BE, APRN, CC, NET, CIGI, COUR, CS, CYBR, DDOG, DVA, DXCM, DUK, EB, EXPE, FLO, GDDY, HUBS, HII, ILMN, K, LH, MLM, MHK, MCO, PTEN, PEP, PCG, PM, PIPR, QLYS, SSTK, TEX, TTE, TWTR, UPWK, VRSN, WU, YELP, ZBRA, ZEN, & Z.

News & Technicals’

This week, the Biden administration rolled out a plan to allocate $5 billion to states to fund electric vehicle chargers over five years as part of the bipartisan infrastructure package.  The historic investment is part of the administration’s broader plan to combat human-caused climate change and advance the clean energy transition.  Despite a rise in EV sales in the U.S. in recent years, the transportation sector is still one of the largest contributors to U.S. greenhouse gas emissions.  Disney reported earnings for the fiscal first quarter that beat analyst estimates.  In addition, disney+ subscriptions beat estimates, adding nearly 12 million subscribers in the quarter.  Disney’s parks, experiences, and consumer products division saw revenues reach $7.2 billion during the quarter, double the $3.6 billion it generated in the prior-year quarter.  According to people with knowledge of the matter, Salesforce co-CEOs Marc Benioff and Bret Taylor spoke about the company’s vision for an NFT cloud service.  The discussion came during an online sales kickoff on Wednesday.  In a December blog post, a director of the market strategy at Salesforce predicted that 2022 would be a big year for NFTs.  Shares of Delivery Hero plummeted around 29% Thursday.  Analysts pointed to Delivery Hero’s 2022 guidance as to the reason behind the negative market reaction.  The Germany-based food delivery firm forecast core profit margins between 1% and 1.2%.  Unilever’s CEO has ruled out any “transformational” acquisitions after its failed £50 billion GSK bid.  Alan Jope told CNBC said major deals were “off the table” after receiving pushback from investors.  Instead, the company pointed to further price risings in 2022 as it reported its results Thursday.  Treasury yields moved slightly higher in early Thursday trading, with the 10-year inching higher to 1.9406% and the 30-year rising to 2.2465%. 

After a nice rally Wednesday, the market will now turn its attention to inflation as we wait for the CPI report.  Some suggest the number will come in hot with inflation running at the highest level in more than 40 years.  If that is the case, it will pressure the FOMC to act more aggressively in the March meeting.  It’s hard to know how the market will react to the CPI reading.  However, if the market sees the chances of a 50 basis point rate increase rising, we should not rule out the possibility of an adverse reaction.  Though the DIA broke through its 50-day average yesterday, the SPY, QQQ, and IWM remain in a precarious technical position if the bears happen to reengage.  Toss in a huge day of earings, and the recipe for another day of volatile price is complete. 

Trade Wisely,

Doug

Improved Technical Position

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Technical Position

The surge upward in the Dow on Tuesday improved the technical position of the index as it tested its 50-day average as resistance.  Unfortunately, the SPY, QQQ, and IWM still have a lot of work to do with significant technical and price resistance levels above to test the resiliency of the bulls.  Moreover, expect price volatility to remain high with a jam-packed earnings calendar for the next two days, a possible market-moving CPI before the bell on Thursday. 

Asian markets closed green across the board overnight, with the HSI leaning the way up 2.06%.  This morning, European markets are also in rally mode, with all indexes advancing in the morning session.  Ahead of a big day of earnings data, U.S. futures seem ready to shake off worries of the pending CPI report Thursday morning, pointing to bullish open across the board.  However, watch for whipsaws or the possible pop and drop as we test overhead resistance levels if the hit and miss earnings results continue.

Economic Calendar

Earnings Calendar

We have a busy day on the Wednesday earnings calendar with nearly 170 confirmed reports.  Notable reports include DIS, AFG, NLY, ARCC, BG, CCJ, CHEF, CME, CXW, CVS, DFX, FWRD, FOX, GSK, GBDC, HMC, IIVI, IRBT, LAD, MAT, NESA, MGM, MOH, MSI, NGL, ORLY, PAG, PPC, RDWR, SGEN, SONO, TEVA, TM, TRMB, TWLO, UBER, YUM, & ZNGA.

News and Technicals’

Facebook owner Meta closed with a market cap below $600 billion on Tuesday for the first time since May 2020.  That also happens to be the number House legislators picked as the threshold for a “covered platform” in a package of competition bills aimed at Big Tech.  The milestone points to one of the challenges of crafting laws that target the tech industry.  Gas supplies to Europe will more likely be disrupted because of violence in the region rather than as a result of being weaponized, Dan Yergin told CNBC on Tuesday.  Russia provides more than 30% of Europe’s gas, and Europe’s gas markets are linked by a network of pipelines, some of which pass through Ukraine.  Although OPEC+ has decided to go ahead and return production output to 400,000 barrels per day for March, some producers could struggle to return to previous levels of production, said Yergin.  WHO official Maria Van Kerkhove said the omicron subvariant BA.2 is more transmissible than BA.1, currently the dominant version of omicron worldwide, and will likely become more common.  Dr. Abdi Mahamud, the WHO’s Covid incident manager, said it’s unclear whether BA.2 can reinfect people who previously had BA.1.  Van Kerkhove emphasized that there’s no indication of a difference in illness severity between BA.2 and BA.1, though she noted that research is ongoing.  The House passed a temporary government funding bill to prevent a shutdown later this month.  The Senate plans to approve the plan by a February 18 deadline to avoid a lapse in federal funding.  The bill would extend funding through March 11 and give lawmakers enough time to craft a long-term spending plan.   Treasury Yields relaxed slightly in early Wednesday trading, with the 10-year dipping to 1.9216% and the 30-year declining to 2.2147%.

The Tuesday rally improved the technical position of the Dow, testing its 50-day moving average as resistance.  The SPY has seesawed in a consolidation reversing its direction four days in a row as it consolidated between the technical levels of the 200 and 50-day averages.  Unfortunately, the QQQ remains challenged by the overhead resistance of its 200-day average, and the IWM faces nearly a year’s worth of overhead price resistance.  That said, the bulls are working hard with the help of institutions like JPM, promoting an upside rally.  Earnings results remain mixed, but the next two days will be jam-packed on the earnings calendar so prepare for more price volatility and the possibility of substantial overnight gaps.  Keep in mind as you plan forward, we will get a CPI number Thursday morning that could prove substantially market-moving.  Also, keep an eye on overhead resistance for the entrenched bears and the possible Russian invasion of Ukraine that may upset any bullish sentiment in half a heartbeat.

Trade Wisely,

Doug

Challenging Price Volatility

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Challenging Price Volatility

Inflation, rate increases, hit and miss earnings results, and the looming threat of a Russian invasion of Ukraine, the challenging price volatility is likely to continue in the week ahead.  While the bears are fighting to defend the recent lower high and downtrend, the bulls are fighting to hold a higher low after last week’s rally.  As a result, traders will have to remain nimble as we move toward a look at inflation Thursday morning that could push higher given the surging oil prices.  Should Russia invade as the U.S. government suggests, all bets are off, and anything is possible, so plan your risk carefully.

Asian markets traded mixed with Shanghai jumping higher by 2.03% after the holiday break.  European markets trade in a choppy early session but currently show modest gains when writing this report.  U.S. futures are off the overnight lows yet continue to point to a modestly lower open ahead or earnings data a lite economic Monday calendar. 

Economic Calendar

Earnings Calendar

We kick off the new trading week with about 70 companies on the earnings calendar.  Notable reports include ACM, AMGN, ACLS, CRNC, CHGG, ENR, HAS, LEG, L, NUAN, ON, RMBS, SPG, TTWO, THC, TSN, & VRNS.

News and Technicals’

Macron will meet with Putin in an attempt to avoid a Russian invasion.  “It is indispensable to avoid degradation of the situation before we build mechanisms and gestures of reciprocal trust [with Russia], “France’s President Emmanuel Macron said in an interview.  Monday’s meeting in Moscow is crucial for the French president, who has been pushing for a more independent European Union in terms of defense.  In recent weeks, tensions between Russia and the West over Ukraine have ramped up significantly.  As global powers have scrambled to prevent an all-out war between Ukraine and Russia, Germany has been accused of actively failing to help defend Ukraine from a possible attack.  Germany has refused to send military hardware to Ukraine, unlike other countries.  Ukraine is not a member of the EU or NATO, and Germany has a conundrum over its dynamics with Russia when it comes to energy.  Protesters have shut down downtown Ottawa for the past eight days, with some participants waving Confederate or Nazi flags and some saying they wanted to dissolve Canada’s government.  Ottawa police said issued hate crime charges against four people, and they were investigating threats against public figures jointly with the U.S. Federal Bureau of Investigation.  The well-organized blockade, which police say has relied partly on funding from sympathizers in the United States, saw protesters bring in portable saunas on Saturday to combat frigid temperatures.  Treasury yields moved lower in the early Monday trading, with the 10-year dipping to  1.9014% and the 30-year falling to 2.1934%. 

With the looming threat of a Russian invasion of Ukraine, an earnings calendar chalked full of reports, and a rate increase just around the corner, the challenging price volatility is likely to continue.  The bulls and bears are locked in a battle for control, with the bulls fighting to hold a higher low and the bears fighting to enforce the current lower high and downtrend.  Oil continues to surge higher, raising concerns that the CPI number on Thursday morning will show another increase in inflation.  The T2122 indicator indicates we still have room to move down before reaching a short-term oversold condition.  That said, with the futures rising off the overnight lows in the pre-market pump, we should not rule out the possibility of a test lower.  Even with all the selling, the SP-500 P/E ratio remains 82% above the historical average suggesting stock valuations remain high.  Given the hit and miss earnings results this quarter, we have a challenging spring and summer if the rising rates slow the economy as prescribed.  Should Russia invade, all bets are off, and anything is possible, so plan your risk carefully in the week ahead. 

Trade Wisely,

Doug

Considerable Technical Damage

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Considerable Technical Damage

Yesterday’s selling created considerable technical damage, with the indexes failing at or below critical averages while setting more lower highs in the current downtrend.  We could see some of that damage quickly repaired in the QQQ with bullish results from AMZN.  However, the bulls will require a significant and sustained effort to repair the overall downtrend.  Today the attention will not turn to the Employment numbers that, unfortunately, could show substantial job losses in January due to the pandemic surge. 

Asian markets closed mostly higher overnight, led by the Hang Seng surging upward 3.24%.  Sadly, that sentiment is not shared by the European indexes seeing a lot of red this morning after bank rate hikes.  Finally, with jobs numbers around the corner, U.S. futures point to a mixed open with Ukraine uncertainty growing as we head into the weekend.  So buckle up; it could be a wild morning session of volatility as traders and investors sort through the data.

Economic Calendar

Earnings Calendar

We get a little break on the Friday earnings calendar with less than 40 confirmed reports.  Notable reports include ADP, AON, BMY, CBOE, ETN, REGN, SNY, & SPB.

News & Technicals’

Amazon shares rallied in extended trading Thursday after the company posted a big earnings beat for the fourth quarter, helped by a gain on its investment in electric vehicle company Rivian.  The company also disclosed revenue from its fast-growing advertising business for the first time.  Conversely, Ford shares slid after reporting fourth-quarter earnings Thursday, which significantly missed Wall Street’s earnings expectations and slightly missed revenue.  By 2022, Ford estimates it will earn between $11.5 billion and $12.5 billion in adjusted pretax profits and generate between $5.5 billion to $6.5 billion in adjusted free cash flow.  Snap reported earnings for the fourth quarter Thursday that beat analyst estimates on earnings, revenue, and user growth.  The report marks Snap’s first profitable quarter on a net income basis as a public company.  The report comes a day after Facebook parent Meta delivered disappointing guidance for the first quarter that dragged down several social media stocks, including its own.  The world’s largest contract chipmaker, TSMC, has committed to investing $100 billion over three years to ramp up production.  Rival Intel announced last March that it plans to spend $20 billion on two new chip plants in Arizona.  In the short term, semiconductor analyst Peter Hanbury expects the recovery from the chip shortage to be “choppy.”  Several other companies in the semiconductor supply chain will benefit from investments made by the chipmakers.  Treasury yields rose in early Friday trading, with the 10-year edging higher to 1.838% and the 30-year slightly higher at 2.157%.

The Thursday selloff left behind considerable technical damage in the index charts.  The DIA not only failed its 50-day average, and the SPY reversed while still below this critical psychological level.  At the same time, the QQQ failed its 200-day average, with Facebook losing $237.6 billion with a record stock market single-day loss.  That said, the selling seemed relatively controlled without a significant spike in fear showing up on the VIX.  With the positive results from AMZN after the bell, some of yesterday’s damage may quickly repair, but it will likely take much more to improve the bearish look of the index charts.  This morning the focus will be the Employment Situation number that the government suggests could be a shocking disappointment.  Not surprisingly, the overnight price action in the futures remains volatile as we wait on the data.  Keep in mind with the tensions continuing to grow at the Ukraine border, the uncertainty of what happens next may prove difficult for the bulls to overcome as we head into the weekend. 

Trade Wisley,

Doug

Facebook Stubbed its Toe

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Facebook Stubbed its Toe

On Wednesday, the relief rally extended, but the sentiment reversed after Facebook stubbed its toe, triggering a substantial-tech selloff after the bell.  It is interesting to note that although indexes gained yesterday, we had more declining issues than advancing issues.  Traders ignored the negative economic data yesterday, but now we turn our attention to jobless claims and the pending Employment Situation number on Friday.  Expect some wild price volatility as the market reacts to a nasty earnings-driven overnight reversal. 

Asian markets traded mixed but mostly lower overnight as economic data, and geopolitical tension weigh on investors.  This morning, European markets see red across the board reacting to earnings as they wait for an ECB decision.  U.S. futures point to an overnight reversal ahead of a busy day of earnings and economic reports.

Economic Calendar

Earnings Calendar

We have the busiest day of the week on the earnings calendar this Thursday, with nearly 200 companies listed.  Notable reports include F, ABB, ABMD, ATVI, ALL, AMZN, APTV, BDX, BIIB, BYD, CTLP, CAH, CI, CLX, COP, CTVA, CMI, DECK, LLY, EL, GPRO, HAIN, HBI, HIG, HSY, HON, ICE, LAZ, LITE, MRK, MTOR, MCPH, NWS, NTDOY, NOK, NLOK, PH, PENN, PINS, POST, PRU, DGX, RL, RHHBY, SKX, SWKS, SNAP, SU, SYNA, TAK, U, GWW, WRK, & WWE.

News & Technicals’

Facebook earnings came in below expectations for the fourth quarter, and the company said numerous challenges are ahead in the first quarter.  Inflation, supply chain disruptions at advertisers, and users shifting to products that “monetize at lower rates” are among the company’s key issues.  Revenue in the first quarter will be between $27 billion and $29 billion, while analysts were looking for that number to top $30 billion.  In addition, Facebook said on Wednesday that Apple’s App Tracking Transparency feature would decrease the company’s 2022 sales by about $10 billion.  Facebook’s admission is the most concrete data point so far on the impact to the advertising industry from Apple’s privacy change introduced last year.  The privacy feature disrupts the behind-the-scenes mechanics of mobile ads, especially those that confirm whether a purchase or download was made.  Nintendo has sold 103.54 million Switch units since its release in early 2017.  In comparison, the company has sold 101.63 million units of the Wii since its release in 2006.  It’s a big milestone for the Switch, as the Wii was one of Nintendo’s most popular consoles.  Like many other consumer electronics companies, Nintendo has been grappling with a shortage of components, particularly semiconductors that power its devices.  Wormhole, one of the most popular bridges linking the Ethereum and Solana blockchains, lost about $320 million in an apparent hack Wednesday afternoon.  The two blockchains are popular in the world of Defi, where programmable contracts can replace lawyers and bankers in some transactions and NFTs.  But few users stick with one blockchain exclusively, so bridges like Wormhole are a necessary go-between.  Treasury yields moved slightly higher in early Thursday trading, with the 10-year rising to 1.7788% and the 30-year edging higher to 2.1156%.

The rally continued Wednesday, but interestingly, we had more declining issues than advancing issues.  Then, however, Facebook stubbed its toe, triggering a tech selloff after the bell that sets the stage for an overnight reversal.  The huge miss on the ADP jobs numbers was largely ignored yesterday, but we will now focus on the weekly Jobless claims and the pending Employment Situation number Friday morning.  Expect price action volatility to remain high with nearly 200 earnings reports today to keep traders on edge and emotions high.   AMZN will be the big hitter after the bell today that can move the market substantially.

Trade Wisely,

Doug

Significant Overhead Resistance

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Significant Overhead Resistance

After the bell, a group of positive earnings continue to inspire the bulls but stay focused as the indexes slam into significant overhead resistance and declining 50-day averages.  Next, our attention will turn toward job numbers culminating with the Employment Situation report Friday morning.  Last week, the government began warning that the infection rates likely hurt jobs growth.  So, plan your risk carefully, watching for whipsaw or reversals as we test resistance levels.

The Nikkei rose sharply overnight, with many Asian markets still closed for the Lunar New Year.  European markets see green across the board this morning as the rebound continues.  Fueled by a group of positive earnings, U.S. futures point to a bullish open with jobs data and earnings results to keep price volatility high.

Economic Calendar

Earnings Calendar

We have nearly 130 companies listed on the Wednesday earnings calendar, with a few unconfirmed.  Notable reports include ABBV, ADTN, AFL, ALGN, ATI, ALGT, ABC, AVB, AVY, BSX, EAT, CHRW, CPRI, CTSH, DHI, ELF, EMR, RACE, GHL, HI, HOLX, HUM, IDXX, JCI, KLIC, LNC, MHO, MMP, MPC, MCK, FB, MET, MTG, NYT, NVO, ODFL, OHI, QRVO, QCOM, RYN, SPOT, TMUS, TMO, & WM. 

News & Technicals’

Ukraine’s President Volodymyr Zelenskyy warned any military confrontation with its neighbor Russia would amount to “a full-scale” war in Europe.  Russia has amassed troops along its border with Ukraine and within its ally Belarus.  However, Ukraine has played down confrontation concerns and warned of the possible consequences of a conflict on Europe’s doorstep.  PayPal reported mixed Q4 2021 earnings Tuesday and guided for the next quarter that fell short of analyst estimates.  The company expects Q1 non-GAAP earnings per share of 87 cents, short of the $1.16 analysts anticipated.  It also reported weak full-year revenue growth guidance for 2022.  AMD reported fourth-quarter earnings after the bell on Tuesday.  AMD expected $21.5 billion in sales in 2022, higher than analyst expectations.  Starbucks earnings fell short of Wall Street’s expectations, but the company’s quarterly revenue topped estimates.  The company saw higher-than-expected costs throughout its supply chain, and a resurgence of Covid-19 meant paying more employees sick leave.  China’s same-store sales fell 14% in the quarter as the country reimposed travel restrictions on some areas.  GM said it expects to generate an operating profit this year of between $13 billion and $15 billion as a semiconductor shortage shows signs of improving.  The forecast is in line with many Wall Street analysts’ expectations and the company’s record $14.3 billion pretax adjusted earnings in 2021.  In addition to the guidance, GM reported fourth-quarter earnings Tuesday that beat Wall Street’s expectations despite slightly missing revenue.  LAST YEAR, the U.S. economy grew at its fastest pace since 1984, but that momentum isn’t carrying into 2022.  An inventory build fueled most of the second-half growth that put annualized GDP up 5.7% for the year.  In the first quarter, the economy may not show any gain and possibly show a loss in GDP.  The pandemic, along with declining help from fiscal and monetary policy, will keep growth in check.  Treasury yields declined slightly early Wednesday, with the 10-year dipping to 1.7769% and the 30-year moving down to 2.0988%.

The index charts have dramatically improved, with Dow more than 2200 points off the low just eight days ago.  However, now face the challenge of significant overhead resistance and the declining 50-day moving averages across all indexes.  After the bell, a group of positive earnings should provide the bulls more inspiration to rally, but can they overcome the technical challenges above?  That will be the question to answer with FB, AMZN earnings, and a slew of jobs data coming our way the rest of the week.  In addition, the T2122 indicator is quickly nearly a short-term overbought condition, so a rest or profit-taking pullback cannot be ruled out in the days ahead.  Finally, the significant point rally has relieved a lot of pressure and kept the market emotionally charged, setting the stage for additional price volatility.  So stay focused and remember to take some profits as prices slam headlong into resistance levels.

Trade Wisely,

Doug