Feb 22, 2022
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“Do you believe in miracles?” – Al Michaels
Today marks the 42nd anniversary of the ‘Miracle on Ice’ when the US men’s Olympic ice hockey team stunned the world with an upset over Russia and Al Michaels uttered the now-famous question “Do you believe in miracles?” The investment community is hoping for its own miracle in Ukraine this morning as geopolitical concerns regarding a potential Russian invasion roil markets. Futures have been lower ever since they opened for trading and Putin’s speech yesterday that recognized separatist Ukrainian regions. Things could be worse, though, as futures currently trade well off their overnight lows as conditions remain fluid.
It’s a busy morning for data as we’ve already had a decent amount of earnings reports, including Home Depot (HD), which is trading down over 2.5%. On the economic calendar, later this morning we’ll get flash readings on Manufacturing and Non-Manufacturing PMIs from Markit along with Consumer Confidence and the Richmond Fed
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
Taking a look at where the major indices stand heading into the week, the picture isn’t pretty. Starting off with the Russell 2000 (IWM), which has been the weakest of the major indices, it is actually the least in danger of making an imminent lower low relative to January, even as it is down more than any of the other three. The Nasdaq 100 (QQQ) will likely open below its closing low from January this morning, and whether it takes out its intraday low remains to be seen. Lastly, the S&P 500 (SPY) will likely manage to open above its closing January low this morning, and we’ll see how things play out from there. One question you may be asking yourself this morning is why the futures aren’t trading even lower this morning. To help answer that question look no further than the charts below. As shown, stocks have already been selling off sharply heading into this weekend’s events, and while we wouldn’t go as far as to say that a Russian move into Ukraine is fully priced in, markets have been anticipating this for the last several weeks.
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Feb 18, 2022
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“In preparing for battle I have always found that plans are useless, but planning is indispensable.” – Dwight D. Eisenhower
It’s Friday again, and heading into the weekend, investors are preoccupied with the same issues they were last Friday, namely Russia and the Fed. While a week has passed, there still hasn’t been much more clarity on either front. Regarding the Fed, the question remains whether they will go with a 25 or 50 bps hike at the March meeting, and market expectations have actually shown a decline in expectations for a 50 bps hike down from close to 100% late last week to just about 36% now. On the Russia front, the only real differences are that the 2/16 ‘invasion date’ came and went without much activity, but now rather than having investors on edge heading into a two-day weekend, this Friday, we’re heading into a three-day weekend which only increases the level of uncertainty.
Closing out the week, the only economic indicators on the calendar are Existing Home Sales and Leading Indicators which will both be released at 10 AM. Futures, which were indicated higher have now reversed into the red on headlines that separatists in Donbas are evacuating women and children into Russia as tensions escalate.
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Even when futures were trading higher, it did little to improve the technical picture for the S&P 500. Besides the fact that the downtrend from the January high remains firmly in place, yesterday’s decline took SPY back below its 200-day moving average, so until that changes, bulls will have little incentive to take a stand.
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Feb 17, 2022
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“If you have more than 120 or 130 IQ points, you can afford to give the rest away. You don’t need extraordinary intelligence to succeed as an investor.” – Warren Buffett
Futures are in the red again this morning but just modestly, and while they’re off their lows of the overnight session, they’ve just recently started heading lower again. Russia continues to take up a lot of the headlines, but unfortunately, there’s little in the way of resolution on the horizon. Just released headlines quoting US officials suggest that Russia is moving towards an imminent invasion, and US Secretary of State Anthony Blinken will head to the UN today to address the Security Council. No one besides Putin really knows when and how the situation will resolve itself.
Earnings season came to an ‘unoffical’ close today with Walmart’s (WMT) better than expected report, and given the multiple tape bombs that were dropped throughout the reporting period, investors will be happy to see this earnings season wind down. It was a busy morning for economic data as well, and while most of this week’s data has been better than expected, this morning’s results were mixed. To hear out instant take on all of the reports listen to it here.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
We’ll discuss it in more detail later today, but after seeing the latest investor sentiment readings from the American Association of Individual Investors (AAII), we couldn’t not mention them. As of the latest survey, bullish sentiment dropped from an already low reading below 25% to less than 20% this week. As shown in the chart below, the only other times that bullish sentiment was as low as it is now were in January and May 2016. Just about every survey of sentiment these days, whether it covers the economy or financial markets, shows elevated levels of pessimism. We realize there’s no shortage of concerns out there and you can take your pick as to which one is the biggest problem, but one has to ask whether these levels of pessimism are starting to get a bit extreme.
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Feb 16, 2022
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“Swim upstream. Go the other way. Ignore the conventional wisdom.” – Sam Walton
Retail Sales were just released and came in much stronger than expected at the headline level (3.8% vs 2.0%). Backing out Autos and Gas, the numbers were even stronger relative to expectations. Last month’s report was revised lower than originally reported but not by enough to offset this month’s strength. Other data released this morning includes Import and Export Prices, and both of those were also stronger than expected. Still on the calendar today, we have Industrial Production (9:15), Capacity Utilization (9:15), Business Inventories (10:00), and Homebuilder Sentiment (10:00). Then at 2 PM we’ll see a release of the Minutes from the January meeting.
Futures have seen a bit of a bounce in reaction to news but are still indicated to open modestly in the red.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
Yesterday was just the third time in 2022 that the S&P 500 tracking ETF (SPY) traded in positive territory from the opening to the closing bell, and over the last 50 trading days, there have been just eight times where the S&P 500 traded higher all day. As recently as 2/1, though, the trailing number of times over the last 50 trading days that the SPY traded higher all day was at just six which was the lowest reading since March 2018. What’s even more notable is that back in early December, just as Powell was retiring the term transitory, the 50-day reading of the number of trading days that SPY traded in positive territory for the entire trading day reached a record high of 20. In other words, there’s been quite a reversal in the last three months where the market has frequently opened higher and stayed there to more a of choppy environment where the market has jumped between gains and losses throughout the trading day.
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Feb 15, 2022
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“What we know is a drop, what we don’t know is an ocean.” – Isaac Newton
Investors have breathed a sigh of relief this morning on headlines that some Russian troops on the border of Ukraine are starting to return to their bases. Setting aside the fact that it wouldn’t make a lot of sense to take comments from a would-be invader seriously, investors will take any positive news while they can get it. The bottom line is that like the quote above, there is much more we don’t know about the situation at hand than what we do know, and that doesn’t even include the FOMC and the state of the US economy. On the latter, the economic calendar starts to pick up today and for the rest of the week. Today’s reports include PPI and Empire Manufacturing which will both be released at 8:30. For our first take on the data, make sure to listen to our Twitter Spaces where we will break it all down.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
A potential easing of Russia-Ukraine tensions has caused WTI crude oil prices to fall over 3% from yesterday’s close to the lowest levels since – hold on for it – last Friday. With energy prices lower, you would expect Energy stocks to show weakness today, and that’s exactly what we’re seeing in the pre-market with the Energy Select Sector ETF (XLE) trading down nearly 2%. While the positive correlation between crude oil prices and energy stocks is holding up so far today, we would note that in yesterday’s trading the two traded inverse with each other as WTI traded up over 2% while energy stocks traded down more than 2%. That was the first time in over a year that energy stocks were so weak on a day that crude oil was up over 2%.
Despite yesterday’s inverse trading, crude oil and energy stocks have been joined at the hip for the last year. Through the close yesterday, WTI was up 59% over the last year while the Energy sector was up 53%. While those performance numbers are already similar to each other, before Monday’s divergence, less than one percentage point separated their performance over the trailing twelve months. If tensions over Ukraine do in fact ease over the coming days, look for energy prices and therefore energy stocks, to take a breather from their torrid performance this year.
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Feb 14, 2022
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“I’m just one person on the committee.” – James Bullard
It was looking like a rough start to the week as European equities traded down well over 2% and US futures were lower by more than 1%, but comments from Russian Foreign Minister Sergei Lavrov that appeared to open the door to diplomacy have caused some relief and a rebound in futures. Now, attention has shifted to St. Louis President James Bullard who is being interviewed on CNBC for further insight into his views on inflation.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
After two weak days heading into the weekend, all of the major averages closed out last week back below their 200-day moving averages (DMA). As recently as Wednesday, the DJIA (DIA) was above its 50-DMA, but Thursday’s CPI and subsequent comments from Bullard and then the Russia tensions on Friday pushed the index back below both of those levels. For the Russell 2000 (IWM), neither the 50 nor 200-DMA ever even came into play last week. The Nasdaq 100 (QQQ) managed to barely close above its 200-DMA on Wednesday but closed out the week near its lows as sellers took control. Last but not least, the S&P 500 (SPY) looked to make a run for its 50-DMA on Wednesday but couldn’t quite get there before the tide turned into the end of the week. In down trending markets, moving averages shift from acting as support to resistance, and based on the last several days of trading, moving averages for the major indices have increasingly acted as a ceiling on prices rather than a floor.
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