Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Tuesday, Jan. 9, 2024. The Bottom Line segment of today’s podcast starts at (4:11) for listeners who want to skip ahead.
State of Play
Yesterday saw the first major tech rally of the year, as the Nasdaq advanced by 2%+. It was actually the best day since November for not just the Nasdaq but also the S&P 500. There was no clear catalyst for this, just as there had not been much of a clear catalyst for the selling we saw last week. After the close there was more bad news from Boeing (BA 0.00%↑) and Samsung, which issued a profit warning.
As we look at our board of indicators at 0635, it unfortunately looks like we are going to give some of yesterday’s gains back:
Stock index futures are pointing to a lower open with small caps leading the drop. The Russell 2000 is down 1.2%. Nasdaq and S&P 500 are down about 0.4% to 0.5%;
Bonds are seeing some selling as well, with the 2-year yield up 3 basis points to 4.38% and the 10-year up 5bps to 4.05% (yields move inversely to prices);
Commodities are rebounding, with WTI crude oil up 2% to trade around $72/barrel and natural gas up 2%. Copper is not going along for this however, down 0.4%;
Cryptos are rallying again, presumably on news of the spot Bitcoin ETF. Bitcoin is up 5% to trade around $46,500.
Known Events
Earnings season kicks off this week and there are a few to tell you about. Acuity Brands (AYI 0.00%↑) just beat earnings estimates and reported revenue in line with expectations.
Tilray (TLRY 0.00%↑) and Albertsons (ACI 0.00%↑) are due to report before the open at 0930. After the close we’ll hear from WD-40 (WDFC 0.00%↑) and PriceSmart (PSMT 0.00%↑), among others.
It’s a pretty quiet day in terms of economic data, with the US trade balance the only release worth talking about. This number is out at 0830. The expectation is for a trade deficit of $65 billion, roughly in line with last month’s. Remember that the US is the world’s biggest consumer and therefore is expected to run a trade deficit — in fact, the more stuff the US imports, generally the better the global economy is.
The Bottom Line©️
Goes to show that just when The Contrarian speaks of markets being stuck in a ‘holding pattern’ that we get a big rally. This is what happens in bull markets. Investors bid up stocks when they have nothing better to do. Consider this your reminder that we are still very much in a bull market.
Today it looks like skittishness could be back on the menu however. The pre-market drop in small caps, the most risk-sensitive part of the stock market, is a bit worrisome. Somebody should check the data for how markets perform on days when the Russell is down 1% or more before the open. Futures more often than not are contrarian indicators, but (one would suspect) maybe not when there is such a big move.
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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Some Earnings, US Trade Balance