GOOGL and AMD Guidance Disappoints

On Tuesday, markets opened a bit lower.  SPY opened down 0.15%, DIA opened down 0.12%, and QQQ gapped down 0.25%.  At that point, we saw a bit of divergence with SPY meandering back and forth across the gap all day.  Meanwhile, DIA did the same until about 10:45 a.m. when it very lowly rallied the rest of the day, closing not far from the highs.  However, QQQ continued to slowly sell off all day long after the open closing not too far up off the low.  This action gave us a white-bodied Spinning Top candle.  At the same time, QQQ printed a black-bodied Bearish Harami. But DIA gave us a white-bodied, large-body candle.  DIA printed a new all-time high and a new all-time high close.  SPY gave us a new all-time high, but not a new all-time high close.  Obviously, all three remained above their T-line (8ema).

On the day, five of the 10 sectors were in the green as Energy (+0.74%) led the way higher.  At the same time, Technology (-0.90%) was by far the worst-performing sector. Meanwhile, the SPY lost 0.08%, DIA gained 0.31%, and QQQ lost 0.67%.  Meanwhile, VXX lost 1.30% to close at 14.40 and T2122 dropped back outside of its overbought territory to the very top of the mid-range at 79.55.  10-year bond yields dropped to 4.036% and Oil (WTI) climbed 1.32% to close at $77.79 per barrel. So, markets started the day down just a bit and then diverged.  Tech (and in turn the QQQ) which have led markets for a long, long time, moved a bit lower while the lagging mega-cap DIA kept climbing and SPY trod water.  This all happened on a lower-than-average volume in the SPY and DIA as well as a just less-than-average volume in the QQQ.

The major economic news released Tuesday included January Conf. Board Consumer Confidence, which came in just below expectation at 114.8 (compared to a forecast of 115.0 and the previous reading of 108.0).  Still, that was a two-year high for the gauge.  At the same time, December JOLTs Job Openings were higher than predicted at 9.026 million (versus a forecast of 8.750 million and a November value of 8.925 million).  So, the economy remains strong with employers continuing to look for new employees.  Finally, after the close, Weekly API Crude Oil Stocks showed a larger drawdown than anticipated at -2.500 million barrels (compared to a forecasted -0.867 million barrels but far less than the prior week’s 6.674-million-barrel drawdown).

After the close, AMD, GOOGL, AX, BXP, CP, CB, EQR, FIBK, GOOG, MTCH, MSFT, MDLZ, RNR, RHI, SWKS, SYK, TSBA, and UMBF all reported beats on both revenue and earnings.  At the same time, ASH, ENVA, FBIN, LFUS, MOD, and TER all missed on revenue while beating on earnings.  On the other side, HA and UNM both bear on revenue while missing on earnings.  However, EA, JNPR, and SBUX missed on both the top and bottom lines.  It is worth noting that AMD, EA, LFUS, MOD, and MDLZ lowered their forward guidance.  Meanwhile, ASH, SYK, and UNM raised guidance.

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In stock news, GM CEO Barra promised to buy back another 200 million (of 1.2 billion outstanding) shares.  In addition, she promised a 33% dividend increase. Later, Nippon Steel announced it had agreed in principle to $16 billion in loans from MUFG and the two other largest Japanese banks for the financing to buy X.  Later, WHR said that the Red Sea problems (causing ships to go around Africa on the way to Europe, adding 15 days to the transit from Asia) will begin impacting its European business, but did not specify a financial impact.  At the same time, APH announced it is acquiring a division of CSL in a $2 billion all-cash deal.  Later, ENB said it would be cutting 650 jobs (5% of its workforce) as part of a cost-cutting drive. Elsewhere, Bloomberg reported that PYPL plans to lay off 9% of its workforce in 2024.  At the same time, Reuters reported that TSLA vehicle registrations in CA fell in Q4, the first decline in more than three years.  45,952 TSLA cars were registered in CA in Q4, down from 52,782 in Q4 of 2022. Later, NDAQ announced it is planning to cut “hundreds” of jobs as it integrated fintech firm Adenza into its operations.  Other employees will be reassigned as the technology eliminates the need for many employees.  (NDAQ bought Adenza for $10.5 billion in June 2023.)   After the close, WMT announced a 3-for-1 stock split as of February 23.

In stock legal, governmental, and regulatory news, an Australian court heard closing arguments in a case against BAYRY (Bayer).  The judge will decide whether BAYRY’s Roundup weedkiller caused cancer.  At the same time, Saudi Arabia told the national oil company to ditch plans to expand production, which essentially canceled major projects for SLB, HAL, and BKR, which were all down sharply on the news.  Later, BA said that it was withdrawing a request for exemption of safety regulations for its 737 MAX 7 (an exemption the company has been lobbying Congress and the FAA to get for a year) amidst the ongoing fallout from its quality control crisis.  Meanwhile, the NY Attorney General filed suit against alleging the company failed to protect and reimburse victims of fraud.  At the same time, the US Chamber of Commerce and two Texas business groups sued seeking to force the FCC to allow businesses to discriminate when it comes to internet access.  (The suit seeks to let internet service providers charge different groups different rates and give them different levels of bandwidth based on race, ethnicity, religion, or income level.  Elsewhere, JBLU and SAVE filed for an expedited appeal in their bid to overturn a lower court ruling preventing the companies from merging (which itself came after the FTC had blocked the merger).  At the same time, V was sued by consumers alleging that the company had failed in its duty to make “vanilla” gift cards less likely to be drained by thieves.  (This involved cards sold at WMT, TGT, and CVS among other retailers, which the complaint said can be drained by thieves while still inside their packaging at the stores and undetected by consumers.)  Meanwhile, a Delaware judge invalidated Elon Musk’s $56 billion pay package from TSLA, siding with shareholders who had called the package unfair.

So far this morning, ADP, AVY, BA, BSX, GIB, EVR, FTV, HES, LII, NDAQ, NMR, OTIS, ROP, TEVA, TMO, and UMC all reported beats on both the revenue and earnings lines.  Meanwhile, APTV, EAT, ODFL, PSX, and SLGN missed on revenue while beating on earnings.  On the other side, GPI, NAVI, and NYCB beat on revenue while missing on earnings.  However, MHO and ROK missed on both the top and bottom lines.

Overnight, Asian markets were mixed with China again down sharply.  Shenzhen (-1.95%), Shanghai (-1.48%), and Hong Kong (-1.39%) led the losses while Australia (+1.06%), India (+0.95%), and Japan (+0.61%) paced the gains.  In Europe, bourses lean heavily to the green side at midday with four spots or red amidst 11 spots of green on the board at the break.  The CAC (+0.13%), DAX (-0.01%), and FTSE (+0.10%) “lead” the region higher on volume with many smaller exchanges up stronger such as Athens (+1.55%) in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a mixed but leaning strongly bearish start to the day.  The DIA implies a +0.09% open, the SPY is implying a -0.47% open, and QQQ implies a -1.05% open at this hour.  At the same time, 10-year bond yields are down a bit to 4.026% and Oil (WTI) is down 1.00% to $77.04 per barrel in early trading.

The major economic news scheduled for Wednesday includes Jan. ADP Nonfarm Employment Change (8:15 a.m.), Q4 Employment Cost Index (8:30 a.m.), Jan Chicago PMI (9:45 a.m.), EIA Weekly Crude Oil Inventories (10:30 a.m.), FOMC Rate Decision and FOMC Statement (both at 2 p.m.), and FOMC Press Conference (2:30 p.m.).  The major earnings reports scheduled for before the open are include APTV, ADP, AVY, AVY, BA, BSX, EAT, COR, GIB, EVR, FTV, GPI, HES, LII, MHO, MA, NDAQ, NYCB, NVO, ODFL, OTIS, PSX, ROK, ROP, SLGN, TEVA, TMO, and UMC.  Then, after the close, AFL, ALGN, AVB, AXS, BHE, BOOT, BV, CHRW, CCS, CMPR, CTVA, CACC, FLEX, THG, LSTR, MTH, MEOH, MET, NXT, PTC, QRVO, QCOM, SEIC, SIGI, TTEK, UGI, and VSTO report.

In economic news later this week, on Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Q4 Nonfarm Productivity, Q4 Labor Costs Index, S&P Global Mfg. PMI, Dec. Construction Spending, Jan. ISM Mfg. Employment, Jan. ISM Mfg. PMI, Jan. ISM Mfg. Price Index, and Fed Balance Sheet.  Finally, on Friday, Jan Avg. Hourly Earnings, Jan. Nonfarm Payrolls, Jan. Private Nonfarm Payrolls, Jan. Participation Rate, Jan. Unemployment Rate, Dec. Factory Orders, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-year Inflation Expectations, and Michigan 5-year Inflation Expectations are reported.


In miscellaneous news, the Biden Administration announced it had offered another tender for 3 million barrels with a June delivery date.  This is the latest tranche in the bid to refill the Strategic Petroleum Reserve. Elsewhere, President Biden said Tuesday that he has decided how the US will respond to the deadly drone attack on US troops in Jordan (by Iran-backed militia).  Most analysts believe the most likely response will be attacks on some Iranian-backed militias and/or assets in the Middle East (such as Syria and Iraq).  However, the President took the statesmanlike tone that we didn’t need an expanded regional conflict such as a direct strike on Iran itself is likely to bring.

In other news, the IMF raised its global growth forecast for 2024 on Tuesday.  The new expectation is for 3.1% global GDP growth (up from a +2.9% forecast from October).  In the process, the IMF echoed what the Fed has been saying, stating that growth is holding up even as inflation continues to fall.  IMF Chief Economist Gourinchas went on to say the world is in its final descent into a soft landing.  In the US, mortgage demand for new home purchases fell 11% last week (compared to the prior week) and were r20% lower than the same week one year ago.  Applications for refinance loans actually increased 2% on a week-on-week basis (+3% from one year earlier).  This averaged out to a total mortgage application volume decrease of 7.2% week-on-week.  This came as the national average 30-year-fixed rate on a conforming loan remained at 6.78% and closing points rose to 0.65 (up from 0.63 the prior week).  The average loan size also rose to $444,100 which was the largest since May 2022.

With that background, it looks like we are in for a rocky start to the day with the big dogs of tech gapping down the QQQ to start the premarket and then putting in a volatile black-bodied candle since that start. QQQ also gave up its T-line (8ema) in the process. SPY followed QQQ lower, just with much less energy and remains above its T-line. Meanwhile, DIA is diverging and made a modest gap higher to start the early session and has put in a very small-body, indecisive candle since that start. So, the Bulls were disappointed by the GOOGL and AMD beats or guidance last night. In terms of extension, none of the three are too far stretched from the 8ema. T2122 has also fallen to just outside the overbought range. This means the market has room to run in either direction, if the Bulls or Bear can gain enough momentum to do it. Once again, even though 99% of the market knows exactly what to expect from the Fed, with the Fed announcement this afternoon, don’t be surprised if today is a “wait and see” day until 2 p.m. and then volatile the last couple of hours. Also, continue to keep an eye on those Tech Big Dogs. If they lead in one direction, it is basically impossible for the rest of the market to do anything but follow given their trading volumes.

As always, be deliberate and disciplined…but don’t be stubborn. If you have a loss, admit you were wrong and take that loss before it gets out of hand. And when the price does move in your direction, always move your stops in your favor and take a little profit off the table. You have to keep the “Legend of the Man in the Green Bathrobe” in mind. In a winning situation, it is NOT HOUSE MONEY you’re betting, it’s YOUR MONEY! There is no reason to keep raising your bet (risk) size just because you’ve had a win. Finally, remember that trading is not a hobby, it’s a job. The gains are real and so is the risk. So, treat it that way. Do the work and follow the process. Stick to your trading rules, trade with the trend, and take those profits when you have them. Do the work!

See you in the trading room.


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