/ February 06
-
Thursday:
Initial Jobless Claims (214K exp.)
---
Friday:
Non Farm Payrolls (170K exp.)Unemployment Rate (4.1% exp.)
-
Daily Briefing
*There was a positive bias in today’s market, with index performance mixed due to declines in highly influential names; the Nasdaq Composite flirted with the unchanged mark through most of the session, and ultimately settled 0.2% higher; the S&P 500 logged a +0.4% gain and the Dow Jones Industrial Average jumped +0.7%;
*Alphabet (GOOG, -6.9%), which had been on an impressive run, saw a sharp decline after its earnings results didn't meet the high expectations set by investors, compounded by its $75 billion capital expenditure plan for 2025; this loss followed a recent peak all-time high of over $204 just last week on January 31;
*SPY maintains its bullish posture, having successfully tested support and heading for a test of resistance at $613 - $615 (M-Trend & Call Gamma Flip); bulls have the advantage at the moment, and a push above the mentioned range can set up a rally to $630; if support ends up failing, downside stands at the $550-$560 area (S1, 200-DMA)
*The MACD signal has come close to crossing over into sell territory, but so far the bearish event has been averted; given that the histogram is near the neutral level at the moment, we can expect more consolidation action in either direction for now;
*Apple (AAPL, -0.1%) was also in the red after a Bloomberg report surfaced that China was contemplating a probe into its App Store fees and policies; shares recovered nicely off their worst levels, though, after trading down as much as 1.9%;
*Walt Disney (DIS, -2.4%) was another notable decliner, slipping -2.4% after reporting a drop in Disney+ subscribers;
*Tesla (TSLA, -3.58%) and Amazon (AMZN, -2.43%) also came off their recent highs, while NVIDIA (NVDA, +5.21%) and Broadcom (AVGO, +4.3%) bounced from their relative lows;
*Despite these challenges, market breadth was broadly positive, with advancers outnumbering decliners by nearly a 2-to-1 ratio on both the NYSE and the Nasdaq; the equal-weighted S&P 500 was up +0.5% and eight of the 11 S&P 500 sectors closed higher;
*All sector ETFs have now turned positive year-to-date as well, with Healthcare (XLV), Financials (XLF) and Communications (XLC) leading momentum;
*Weaker-than-expected Services PMI readings for January out of China, Europe, and the U.S. fostered some growth concerns, but depressed yields, which in turn (ironically) supported stocks;
*The ISM Services PMI decreased to 52.8% in January (vs. consensus 53.9%) from a downwardly revised 54.0% (from 54.1%) in December; the dividing line between expansion and contraction is 50.0%, so the January reading reflects services sector activity expanding but at a slower pace than the prior month; January marked the 53rd time in 56 months that the Services PMI indicated expansion;
*A slower than expected services PMI jibes with lower inflation readings ahead and higher treasury prices; since services are the nation's largest sector, a deceleration here indicates slower growth for the first quarter of 2025; this outcome is fine for stocks depending on lower interest rates (Financials) and for bonds;
*Among Factors, Momentum (MTUM, +1.58%) and Small Caps (IWM, +1.11%) fared best, reflecting the vibe of the Treasury market;
*The rally in the bond market was undeterred by the news from the U.S. Treasury that it will increase the size of this month's 10-, 20-, and 30-yr auctions by three billion apiece;
*The 10-yr yield dropped nine basis points to 4.42% and the 2-yr yield dropped four basis points to 4.18%;
*TLT gained +1.65% on the day and surpassed the key M-Trend level; now, dealers will start hedging their upside, given the very large short interest against bonds; it seems like Enterprise made an excellent bet earlier this week;