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Equity futures are trying to bounce back from a wild but bearish day. Wednesday was Fed day, the committee decided to keep policy the same and at the same time talked about their drive to 2% inflation, which remains elusive. Tonight’s earnings will be key with big names revealing their latest quarter, also with month end window dressing. Could be a volatile couple of days.

Interest Rates are falling for the first time in a few days, that is putting a nice bid so far under the small cap IWM. Rates are coming in after the Fed decided to pass on rate cuts, but they do see the path lower in short term rates. Currently the market is pricing in rate cuts coming at the earliest in March.

The ECB is announcing their rate decision with a cut, but anything can happen. Stocks in Europe were higher again, up .3% paced by the French CAC. The US dollar fell .1%,gold is ripping higher by more than 1% and is above 2,800 per ounce, crude is slightly lower. German 10 yr bund yields are down 3bps, the same drop in US 10 yr treasury yields. In Asia stock in Japan were higher, China remains closed for New Year’s week.

Earnings last night from Meta, Tesla and Microsoft were out but only 2 of 3 names are performing well today. Microsoft is selling off on cloud weakness though they beat numbers handily. Lam Research also had a good beat, it is rising up 5.7%. This morning Caterpillar is down sharply as they warn of sales drops in 2025, UPS is getting slammed again while Mastercard is up strong, Dow and Comcast are down modestly. Tonight earnings from Apple, Intel, Visal, Deckers, Atlassian and KLA.

Stocks had some big swings yesterday, of course a huge day with a Fed decision and some very big earnings reports after the close. Given the magnitude of the news and the close proximity to month end we were expecting some wild movement, even if the VIX was more subdued. Following the policy decision of no rate cut or hike, Markets went nuclear and sold off sharply only to regain some lost ground. Following some better earnings from IBM and Meta stocks are poised to move higher today.

Another day of poor breadth, stocks are choking on this indicator and cannot seem to be in sync with rally attempts. We had thought even though yesterday was a down session with positive breadth that a rally attempt would happen, but the bulls lacked any punch. Oscillators slipped a bit and are back to neutral but appear to be heading towards the zero line again.
New highs were strong and beat new lows, this indicator is on a buy signal still.

Volume is cranking it up now with big earnings and end of month window dressing coming up. Stocks are moving back n’ forth with little trend, but certainly the turnover has been brisk. Much better volume on the IWM yesterday though that index was down and suffered from a rise in interest rates. .

Some lower support was tested during the day, the SPX 500 sported an inside day but did not quite reach Tuesday’s lows, the VIX was not following through on the highs of the session. But the DIA and IWM did have outside days and finished midpoint of the day, which means doji days. What’s it mean? Indecision at best, stocks are looking to find some firm ground at lower prices. If not, there is plenty of support but at much lower levels.
 

The Internals

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What does it mean?

By and large the internals were horrible, the VOLD finished poorly but the ADD really finished bad, making its highs early and just selling off all session. Ticks were mostly red, several sell programs hit late in the day but the Nasdaq ticks were especially red. Put/calls rose up, and while the VIX did finish well off its lows it was not impressive, rising modestly. It may be a few days to get this indicator back to bullish.
 

The Dynamite

Economic Data:

• Thursday:GDP first look Q4, jobless claims, pending home sales
• Friday: Employment cost index, PCE, income/spending, Chicago PMI

Earnings this week:

• Thursday :UPS, MA, DOW, NOK, LUV, CAT, CMCSA, MBLY, AAPL, INTC,V, KLAC, TEAM, BKR, DECK
• Friday: XOM, CVX, ABBV, CL, PSX, CHTR

Fed Watch:

The first fed meeting of the year with four new voting members this week. Fed funds futures are predicting a pause this time around and for the next meeting, but the May session might be the one where a cut is announced. Regardless, it will be important to listen to the press conference closely for clues on future monetary policy. As always, the data matter most here.

Stocks to Watch

Interest Rates – The first fed meeting of the year is this week, also the first one after a change over in the Administration. Chair Powell is locked in and focused on how to manage monetary policy, and with recent strength in jobs, manufacturing and pricing pressures it seems the committee is ready for a rather long pause. We’ll know more after the press conference Wednesday.

Mag 7 Names – It’s a big week for the Mag 7 as four of these names will report during the latter portion of the week. Is Tesla overdone? Will Microsoft and Meta push their AI initiatives even further? We’ll know more this week, and of course Apple on Thursday evening.

GDP – The first look GDP for Q4 is out Thursday morning after the Fed decision but the committee has a good read on growth. The Atlanta fed GDPNow says we grew about 3% in the quarter, we’ll have to see how much was driven by inflation. Employment cost and PCE Friday will be important to watch, too.

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