Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Wednesday, Feb. 28. The Bottom Line segment of today’s podcast starts at (4:35) for listeners who want to skip ahead.
State of Play
Yesterday was another pretty quiet day, but small caps did advance, with the Russell 2000 adding 1.4%. After the close earnings from Beyond Meat (BYND 0.00%↑) impressed investors and the stock literally doubled overnight. Consider this another sign that speculative mania is alive and well on Wall Street, keeping in mind what we said yesterday about cryptos.
As we look at our board of indicators at 0640, things look a bit mixed:
Stock index futures are pointing to a lower open, with small caps leading the drop. The Russell 2000 is down 0.6% with S&P 500 (SPY 0.00%↑) and Nasdaq down 0.3% to 0.4%;
Commodities are dropping, with WTI crude oil down 1% to trade around $78/barrel and copper down 0.6%;
Cryptos continue their ascent however, with Bitcoin up another 5% to trade around $59,400;
Bonds are seeing a few bids, with the yield on the 2-year down 3 basis points to 4.58% and the 10-year down 3bps to 4.29% (yields move inversely to prices).
Today’s Known Events
Another busy day of earnings. Baidu BIDU 0.00%↑ earlier beat top- and bottom-line estimates, but the stock is still moving lower overnight, down 3%.
TJX Companies (TJX 0.00%↑), the retailer that owns TJ Maxx and Marshall’s, is also due to report before the open at 0930. So too are Advanced Auto Parts (AAP 0.00%↑) and Novavax (NVAX 0.00%↑) and numerous other, smaller companies.
After the close at 1600 we’ll hear from C3.ai (AI 0.00%↑), Salesforce (CRM 0.00%↑), Snowflake (SNOW 0.00%↑), Marathon Digital Holdings (MARA 0.00%↑), AMC Entertainment (AMC 0.00%↑), Okta (OKTA 0.00%↑), Paramount Global (PARA 0.00%↑), Duolingo (DUOL 0.00%↑), Monster Beverage (MNST 0.00%↑), and several others. So quite a smorgasboard, though heavy on the tech stuff.
The only thing worth mentioning in terms of economic data is the second look at fourth-quarter GDP. This report also contains some data on personal consumption expenditures, corporate profits and consumer spending (albeit on a quarterly basis). As a reminder, the first reading showed GDP growth of 3.3%.
The Bottom Line©️
The retailers this morning could be interesting. From all signs the US consumer is holding up quite alright, thank you very much. Cruise line earnings were positive, so this would appear to be quite broad. The broader indexes still aren’t moving much but then they are all at or near all-time highs.
Again cryptos appear to be leading the way. It’s certainly feasible that this crypto rally could collapse, taking stocks with it — without us seeing comparable mania in the equity market. But you figure we need some additional inputs for that to happen, such as new data or bank failures or the Fed or something. Or maybe commercial real estate? Haven’t heard much about that for awhile.
The point is that just because cryptos have been a leading indicator for stocks doesn’t mean that will continue indefinitely. Past performance and all that. When it comes to allocating capital, The Contrarian still doesn’t see very much that he likes. Without all that much cash on reserve, he is happy to sit this next leg of the rally out, should it materialize.
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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More Earnings, Crypto Ascent Cont’d