Payrolls and Overnight Asian Chip News

Stocks put in a roller-coaster day that ended indecisively in the SPY and QQQ.  DIA was also volatile but ended the day down more than the others.  This left us with a long-legged Doji in the SPY, a Spinning Top candle in the QQQ, and a black candle in the DIA.  On the day, SPY lost 0.09%, QQQ, lost 0.07%, and DIA lost 0.47%.  The VXX rose slightly to 19.38 and T2122 rose to mid-range at 47.26.  10-year bond yields came back down after being over 1.75% during the morning to close at 1.723% and Oil (WTI) spiked to $79.58/barrel.

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After the close, CNBC reported that hedge funds are dumping tech stocks (growth stocks) at a massive pace so far in 2022.  They claimed it was the largest rotation by the big money funds in a decade.  This is also obvious on the chart as the QQQ is down 5% so far this year.

Meanwhile, two Asian chipmakers reported strong quarterly updates overnight.  Samsung and STMicro both reported blowout numbers with Samsung saying that its operating profit will be up 52% while STMicro reported its full-year came in +25% sales from the previous year.  Both commented on the strong demand for contract manufacturing services (where they make chips for other brands such as INTC, AMD, NVDA, QCOM, AVGO, and many other tech companies).  However, they also directly compete with some of those as well as TSM, MU, TI, and others. European chip stocks are spiking on the read-through.  We may see the same later with the US chipmaker stocks.

Overnight, Asian markets were mixed again, but leaned heavily to the upside today.  Hong Kong (+1.82%), Australia (+1.29%), and South Korea (+1.18%) led the way higher.  Taiwan (-1.08%) was a big outlier to the downside with the 4 other red exchanges all being not far below flat.  In Europe, markets are mixed at mid-day.  The FTSE (-0.09%), DAX (-0.40%), and CAC (-0.24%) are all trading lower.  However, most of the smaller exchanges are on the upside in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a mixed and modest open.  The DIA implies a -0.01% open, the SPY is implying a +0.14% open, and the QQQ implies a +0.25% open (on read-through from those Asian chipmaker reports).  10-year bond yields are flat (but expect volatility when the Payrolls number hits) and Oil (WTI) is up almost another percent to $80.10/barrel in early trading.

The major economic news scheduled for release Friday includes Dec. Avg. Hourly Earnings, Dec. Nonfarm Payrolls, Dec. Participation Rate, and Dec. Unemployment Rate (all at 8:30 am).  The major earnings reports scheduled for before the market is limited to GBX.  There are no major reports scheduled for after the close.

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Expect movement this morning, especially in the Treasury market and on inflation-sensitive names. If the ADP Nonfarm Payrolls number (more than twice as big of a gain than expected) is any indication of the official Payrolls report at 8:30 am, we could see fear of an overheating in the economy. (For reference, ADP came in a +807k vs +400k est. and the consensus forecast for the official number today is also +400k.) The point is, don't be surprised by a big premarket reaction, which may well lead to either follow-through or a snapback after traders have had a chance to digest the news.

Volatility is the watchword now as markets are not quite sure whether it is time for a downtrend or at least a pullback. Remember that the first rule of making a lot of money in the market is to not lose a lot of money in the market. So, don't be stubborn. When you're wrong, just admit it and take your loss. (That's why we set stops.) Stick to your trading rules and on managing the things you can control. Don't chase, trade with the trend, keep consistently taking profits when you have them, and move your stops in your favor.


Swing Trade Ideas for your consideration and watchlist: IGT, APTV, FFIE, BTU, F, FE, GM, TGT. You can find Rick's review of tickers on his YouTube Channel here. Trade your plan, take profits along the way, and smart. Also, remember to check for impending earnings reports. Finally, remember that any tickers we mention and talk about in the trading room are not recommendations to buy or sell.

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