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Tech Rally Undercut by US Crude Inventory Build-up, Maybe

Tech Rally Undercut by US Crude Inventory Build-up, Maybe

An overnight drop in oil prices could signal problems for the US economy…

No transcript...

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Friday, Feb. 23. The Bottom Line segment of today’s podcast starts at (3:02) for listeners who want to skip ahead.

State of Play

Stocks rallied yesterday, led by tech, after blowout Nvidia (NVDA 0.00%↑) earnings the evening prior. It was in fact the best days for stocks in more than a year. More good news came after yesterday’s close with Block (SQ 0.00%↑) and Carvana (CVNA 0.00%↑) earnings beating estimates. As we look at our board of indicators at 0640, none of that is really reflected in the broader market, which may have other concerns all of a sudden:

  • The major move is in commodities, which are dropping, with WTI crude oil down 1.5% to trade around $77/barrel and copper down 1%. More on that below;

  • Stock index futures are pointing to a slightly lower open, with the Russell 2000 which tracks small caps down 0.4%. Other US indexes are flat;

  • Bonds are down a bit, with the 2-year yield up 3 basis points to 4.74% and the 10-year up 2bps to 4.34% (yields move inversely to prices);

  • Cryptos are also down a bit, with Bitcoin off 1% to trade around $51,000.

Today’s Known Events

It’s a slow day with very little in terms of known events. No economic data to speak of and the only earnings worth mentioning are Warner Bros Discovery (WBD 0.00%↑), Bloomin’ Brands (BLMN 0.00%↑), AerCap Holdings (AER 0.00%↑), and Hyatt Hotels (H 0.00%↑).

That’s it.

The Bottom Line©️

With little in the way of new data forthcoming, we’re left to ponder how much upside is left in this AI-fueled tech rally. The market should soon tell us. Or maybe not. Futures don’t seem to be indicating much of anything outside of commodities, specifically oil.

What’s going on there may be interesting, as this is apparently due to inventory build-up in the US. This signals a drop in demand. Then you have the possibility of Fed rate cuts being postponed, which makes hard assets like commodities less appealing. The more disconcerting part of this from our perspective is the inventory build-up in the US. It could be due to weather (there has been warmer weather in the Midwest this winter, right?), or at least partly, but could also speak to a slowing economy. It’s worth keeping a close eye on this.

If you were looking for more signs of a bubble, Reddit just filed for an IPO. So there is that.


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The daily podcast discusses the major market activity and economic data release schedule for the day ahead, with a contrarian bent. Also includes regular podcast episodes a day (or more) early and without ads or announcements.