Earnings season has moved past its peak and is beginning to settle down after Twitter reports today. Between tomorrow (Friday) and Tuesday, only 161 earnings are scheduled to be released, a significant decrease from the rate of 100+ per day for the past month.
Overall, earnings season seems to have been another success. The rate of S&P 500 stocks meeting or beating expectations remained consistent with prior years. In addition, it does not seem that there has been an overwhelming corporate reaction to the Chinese tariff situation.
Adding to these factors, last week’s non-farm payroll release from January came in as a huge beat, even amid concerns that the uncertainty of the U.S. government shutdown would yield a more pessimistic number.
Money flowed back into stocks on the last day of January, and this has continued through February's open last Friday and into this week. We expected to see some protection now that most of the U.S. indices have seen a historical rally, but yesterday's market-on-close orders, which large funds use to buy or sell stock, was over 1.6 billion to sell in the S&P 500. This suggests not only a concern about protection, but also that some firms liquidated rather than hedged positions yesterday.
Overnight shows some follow-through of this downtrend with the U.S. futures lower following a mixed Asian session. Europe is seeing red across the board with 13 stock markets trading lower right now.
Some of this could be profit-taking following a historical rally that began the day after Christmas. Another possibility is that as the clock ticks toward the end of the temporary budget deal in the U.S. on February 15th, the market is experiencing some concern over what awaits in the days and weeks to come.
Otherwise, the economic calendar is very quiet through next Tuesday. Over the next four sessions, six Fed speakers will speak, but this is not expected to be market-moving since the news from January's recent FOMC meeting left the market with a positive outlook. The remaining scheduled reports also likely will not affect the markets.
So far this year, those trying to short the market rally have been run over. The immediate trend is bullish, the longer trend is bullish, and the intermediate term is slightly bearish.
Rather than looking to short this market, we are waiting for pullbacks to buy, keeping an eye the budget situation. On the S&P 500 futures, we like the 2660-26670 area for support; on the Nasdaq, we see support at 6911 and 6775; and on the Russell 2000, we are looking for support at 1480.
Today’s Economic Calendar:
- Jobless Claims 8:30 AM ET
- Robert Kaplan Speaks 9:15 AM ET
- Richard Clarida Speaks 9:30 AM ET
- EIA Natural Gas Report 10:30 AM ET
- 3-Month Bill Announcement 11:00 AM ET
- 6-Month Bill Announcement 11:00 AM ET
- 4-Week Bill Auction 11:30 AM ET
- 8-Week Bill Auction 11:30 AM ET
- 30-Yr Bond Auction 1:00 PM ET
- Consumer Credit 3:00 PM ET
- Fed Balance Sheet 4:30 PM ET
- Money Supply 4:30 PM ET
- James Bullard Speaks 7:30 PM ET
Friday’s Economic Calendar:
- Baker-Hughes Rig Count 1:00 PM ET
- Mary Daly Speaks 1:15 PM ET
Monday’s Economic Calendar:
- 3-Month Bill Auction 11:30 AM ET
- 6-Month Bill Auction 11:30 AM ETz
Tuesday’s Economic Calendar:
- 8-Week Bill Settlement
- NFIB Small Business Optimism Index 6:00 AM ET
- Redbook 8:55 AM ET
- JOLTS 10:00 AM ET
- 4-Week Bill Announcement 11:00 AM ET
- 8-Week Bill Announcement 11:00 AM ET
- Esther George Speaks 5:30 PM ET
- Loretta Mester Speaks 6:30 PM ET