Stocks Jump On February 24 As “Value” Stocks Lead The Way

Stocks finished the day higher on February 24, with the S&P 500 gaining around 1.14%. The market seemed to like Chairman Powell’s commentary and commitment to low rates for a long time. He literally said nothing new, nothing. Rates were basically unchanged today at 1.38% on the 10-year.

S&P 500 (SPY)

It left the S&P 500 futures at a rather important level of resistance of 3,931. A break above that level likely sets up a retest of the highs at 3,950. I think at this point; it really does get tough for the market to push beyond 3,950. It may turn out that 3,950ish proves to be a top in the market.

I’m sure there are plenty of you that think I am crazy to say it, and perhaps I am. But unless the VIX is going to break below 20, which to this point hasn’t been able to happen, and the 10-year yields drop some, the juice needed to lift stocks isn’t there.

Options volume

Option volumes are still extremely high, in fact, higher than even in December. So the amount of options volume continues to grow. That will make it harder for implied volatility levels to decline; at least, I don’t see why market makers would start reducing their pricing now after all this time.

Breakeven’s

Perhaps one reason why the equity market has brushed off the rising 10-year is that the TIP market has been slower to react. The 10-year TIP is still trading at -80 bps, and while that is higher than in past weeks when it was -1%. It hasn’t moved fast enough to result in breakeven inflation rates falling. That could change next week when we get our next rounds of ISM data.

Nvidia (NVDA)

Nvidia is trading lower post-results, despite reporting better than expected revenue and earnings and providing better than expected revenue guidance. But those gross margins are hurting. The company posted more than 60% revenue growth but no gross margin expansion. So do they have no pricing power? Gross margin guidance was no better.

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Disclosure: Mott Capital Management, LLC is a registered investment adviser. Information ...

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