Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Tuesday, Feb. 27. The Bottom Line segment of today’s podcast starts at (3:45) for listeners who want to skip ahead.
State of Play
Stocks didn’t do much yesterday as expected, but cryptos went nuts with Bitcoin advancing by multiple percent. Record trading volumes in the new spot ETFs are the reason for this. As we look at our board of indicators at 0625, that is still where all the action is:
Cryptos are continuing their ascent, with Bitcoin up 10% to trade around $56,500. That’s actually off of the highs as it briefly crossed $57,000 earlier;
Stock index futures are pointing to modest gains, lead by small caps with the Russell 2000 up 0.4%;
Commodities aren’t doing much, with WTI crude oil up 0.4% to trade north of $77/barrel while copper is up 0.5%;
Bonds are seeing a few bids, with the 2-year yield down 3 basis points to 4.69% whilst the 10-year is down 3bps to 4.27% (yields move inversely to prices).
Earnings
Lowe’s (LOW 0.00%↑) just reported, beating on top- and bottom-line estimates and that stock is moving higher in the pre-market.
Due to report imminently are Norwegian Cruise Lines (NCLH 0.00%↑), AutoZone (AZO 0.00%↑), Macy’s (M 0.00%↑), and LendingTree (TREE 0.00%↑).
After the close at 1600 we’ll hear from Devon Energy (DVN 0.00%↑), Beyond Meat (BYND 0.00%↑), Rocket Lab (RKLB 0.00%↑), Virgin Galactic (SPCE 0.00%↑ ), and EBay (EBAY 0.00%↑), among others.
Economic Data
It’s a pretty busy day for economic data. Durable goods orders are out at 0830. The headline figure is expected to drop by 4.7% month-over-month after no change last month, but if you strip out volatile transportation items it’s a different picture. That number is expected to clock in at 0.2% MoM after rising 0.6% last month.
We then get Case-Shiller home prices at 0900. The 20-City Composite Index, the most widely watched one, is expected to increase by 6.0% year-over-year, an improvement on the 5.4% seen last month. the seventh straight month of increasing annualized prices. So quite a bounce off the lows set last spring, from the looks of it.
Then we get consumer confidence from the Conference Board at 1000. The expectation here is for a reading of 114.8, identical to last month. As we have repeated ad nauseum, the US consumer is the most crucial part of the global economy. It’s still not entirely clear what the CB number is based off of however. But we do know that it goes up and down and that 114.8 is the highest it’s been since last summer.
So by all accounts the US consumer is holding up their end, which makes sense given the almost full employment figures.
The Bottom Line©️
All systems go for stocks then? Remember that cryptos, specifically Bitcoin, have been a reliable leading indicator for stocks going back almost a year now. Will this time prove different? That would seem unlikely under the premise that cryptos are the riskiest of risk assets and if investors are comfortable allocating there, they should be even more comfortable moving to comparably more safe assets like stocks.
This is reinforced by the point that inflows to spot ETFs are the catalyst for the move higher. That would seem to be a pure risk-on play by western institutions. Bitcoin’s single true function is money-laundering. There is certainly ample demand for money-laundering services in countries like Russia and China, but one figures that would be more likely to drive traffic to the coins directly rather than to funds housed by US institutions like Blackrock.
So watch stock indexes and see if they follow Bitcoin higher. They should, though the timing is of course always tricky.
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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Consumer Confidence, Bitcoin Rally