Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Monday, Feb. 5, 2024. The Bottom Line segment of today’s podcast starts at (5:07) for listeners who want to skip ahead.
State of Play
Jerome Powell was on 60 Minutes last night. The Fed chair repeated his hawkish-ish stance from the FOMC meeting last week, saying among other things that rate cuts would be slow in coming. In China, regulators made more noise about addressing that country’s stock market, which dropped to new lows last week. As we look at our board of indicators at 0630, things look a bit skittish:
Stock index futures are pointing to a lower open, led by small caps. The Russell 2000 is down 0.8%. S&P 500 and Nasdaq are down about 0.2% each;
Commodities are selling off a bit, with WTI crude oil down 0.6% to trade below $72/barrel again. Copper is down 0.5%;
Bonds are selling off again as well, with the 2-year yield up 7 basis points to 4.44% and the 10-year up 6bps to 4.09% (yields move inversely to prices).
Today’s Known Events
Powell’s appearance last night means the Fed blackout period is officially over. To drive home this point, we get a mess of Fed speakers scattered throughout this week. For today, Atlanta Fed President Raphael Bostic gives the welcome remarks at a conference on “Uneven Outcomes in the Labor Market” that will be aired at 1400, presumably on the Atlanta Fed’s website. Bostic is a full FOMC voting member this year.
It’s a big day for earnings as well. We’re due to hear from McDonald’s (MCD 0.00%↑), Estee Lauder (EL 0.00%↑), Caterpillar (CAT 0.00%↑), and Tyson Foods (TSN 0.00%↑) intermittently.
After the close at 1600 we’ll hear from Palantir (PLTR 0.00%↑), NXP Semiconductors (NXPI 0.00%↑), Simon Property Group (SPG 0.00%↑), and Chegg (CHGG 0.00%↑), among others.
The Bottom Line©️
Seems there are a few things weighing on markets this morning. China has been unraveling slowly for some time, the only question is just how bad it gets and who in the west will be left holding the bag. The bond market meanwhile is getting wise to Powell’s rhetoric. That means this week’s Fed speakers will be closely watched for any signs of dovishness that might indicate more nuanced discussions inside the FOMC.
You have to figure that a March rate cut is off the board at this point. Indeed Fed fund futures are now pointing to just a 15% chance of this happening. May is still looking promising however, with a 55% chance of a rate cut now being priced in.
It’s another big week for earnings, with the baton being passed from tech to more consumer staples-y names. The Contrarian has several holdings reporting this week, including Estée Lauder, which is his newest position.
The Wall Street Journal informs us that the big tech stocks have “little room for error,” whatever that means. It’s not like big tech, or indeed anybody, is operating under a larger error margin at other times. Would seem to be a bullish signal, if anything…
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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Fed Speakers, Earnings