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. 6, 2024. The Bottom Line segment of today’s podcast starts at (5:07) for listeners who want to skip ahead.
State of Play
Stocks dropped yesterday but finished off the lows. After the close positive earnings from Palantir (PLTR 0.00%↑) and NXP Semiconductors (NXPI 0.00%↑) shifted sentiment into positive territory. As we look at our board of indicators at 0630, all is pretty quiet ahead of another day of earnings and Fed speakers:
Stock index futures are mixed. Tech is pointing to a higher open, with the Nasdaq up 0.2% but small caps are down with the Russell 2000 off 0.5%. The S&P 500 is stuck in the middle, unchanged;
Commodities are doing very little. WTI crude oil is up 0.5% to trade around $73/barrel. Copper is flat;
Bonds aren’t doing anything either. The 2-year yields 4.46%, roughly unchanged, whilst the 10-year yield is 4.16%, also unchanged.
Earnings
Another big day of earnings awaits. We’ve had a couple come in already and these have been quite positive:
Spotify (SPOT 0.00%↑) just reported user figures that beat estimates and that stock is moving higher in the pre-market. It’s been on quite a tear this year, up some 20%. Congrats if you hold Spotify;
Toyota Motor (TM 0.00%↑) reported earlier and raised its full-year outlook. That’s significant not just for Toyota’s stock, which is moving higher, but for the global economy at large. Toyota sells more cars worldwide than just about anybody so that speaks positively to consumer demand;
BP (BP 0.00%↑) and DuPont (DD 0.00%↑) earnings were mixed but both stocks are moving higher in the pre-market;
GE Healthcare (GEHC 0.00%↑) beat on top- and bottom-line estimates but that stock is the lone outlier for some reason, down a bit in the pre-market;
Hertz (HTZ 0.00%↑) is also due before the open;
After the close we’ll hear from Snap (SNAP 0.00%↑), Ford Motor (F 0.00%↑), and Chipotle (CMG 0.00%↑), among others.
Fed Speakers
Cleveland Fed President Loretta Mester speaks at 1200 at an event hosted by the Ohio Bankers League;
Minneapolis Fed President Neel Kashkari is due to give remarks at an event in Mankato, Minn., at 1300;
Boston Fed President Susan Collins is apparently also due to speak this afternoon but could not find independent verification of this;
Finally, Philly Fed President Patrick Harker is scheduled to speak at an event in New Jersey tonight.
Of the four, only Mester is a full FOMC voting member this year. Collins is an alternate. Philadelphia and Minneapolis rotate off this year so that excludes Harker and Kashkari from voting.
The Bottom Line©️
The earnings so far have been positive but the broader market hasn’t caught on yet. Toyota would appear to be particularly good news because of what it says about consumer demand in general. Besides homes, automobiles are the most expensive item people will buy. If the world’s most popular automaker raised guidance that has to be a good thing. Unless of course they’re wrong. There is always that possibility.
That leaves the Fed, which would appear to be weighing on the market still. But really it shouldn’t be surprising that the Fed is reluctant to cut rates in light of the labor market and consumer spending. The Contrarian has been telling you for months that this wouldn’t make any sense and would destroy whatever is left of the Fed’s credibility. As is, Powell is coming out looking quite good here after all but slaying the inflation dragon and now sticking to his guns on price stability.
Sounds like a positive set-up then? Well, we’ll see. There’s always something that can upset the proverbial apple cart. The Contrarian is always on the lookout for such events. Just because there aren’t any headlines today doesn’t mean these can’t materialize very quickly.
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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More Fed Speakers, More Earnings