Question of the Week

There are lots of cross-currents in the market. What do you think will have the greatest impact ?

Earnings Season
Fed Policy Shift
Trade Policy (especially with China)
AI Boom Continues

Yesterday’s session was very deceptive, as the rally hit “Heartbreak Hill,” where major averages stumbled into the close.

Only three sectors finished the session in the green, as Technology (XLK) (led by semis) powered ahead.

Chips Ahoy!

The semiconductor rally gets stronger – with the VanEck Semiconductor ETF (SMH) hitting a new high, as the rate of change (ROC) went parabolic. The relative strength index (RSI) hints at even more near-term upside. 

In fact, there was even more chip news after the close.

Leaderboard and Heat Map

It was nice seeing Materials (XLB) names catch a bid. And all the news in PayPal (PYPL) lends credence to my assertion that 2025 marks the changing of the leadership guard in Financials (XLF).

I want to get excited about United Parcel Service (UPS) and its ramifications for the economy, but the beat-and-move higher was mostly about job cuts.

Finding the Needle

These huge squares and rectangles were bright green yesterday, but the rest of the heat map was mosaic — finding even a speck of green — was akin to a needle in a haystack. Interestingly, even amid the market's negative tone, the market-safe sectors posted the most significant declines.

Factors

A more nuanced look at the market exposed the actual difficulty of the session.

• 104 stocks up with an average gain of 1.33%
• 399 stocks down with an average decline of 1.52%
• Average return -0.93%

Growth, momentum, and core edged higher, while every other factor drowned in a sea of red.

Worst “Up” Day Ever

To put it all in perspective, this was the worst breadth for an up day ever (since 1990).

I’m seeing lots of early gains fade, as smart money takes profits and reloads. It’s a natural occurrence, but food for thought for those holding on to monster gains achieved by ignoring periods of downdrafts and volatility.

The FOMC Decision

The Federal Open Market Committee (FOMC) is expected to cut the Fed funds rate by 25 basis points (bps), but where they go from there remains a mystery for many.

The lack of government data is expected to hinder the Fed, but there is a ton of data out there that I think is better and should be incorporated.

It certainly can’t be ignored, including the ugly report from the Dallas Fed yesterday.

Layoffs Galore

1. United Parcel Service (UPS): 48,000 employees

2. Amazon (AMZN): Up to 30,000 employees

3. Intel (INTC): 24,000 employees

4. Nestle (NSRGY): 16,000 employees

5. Accenture (ACN): 11,000 employees

6. Ford (F): 11,000 employees

7. Novo Nordisk (NVO): 9,000 employees

8. Microsoft (MSFT): 7,000 employees

9. PwC: 5,600 employees

There is a labor crisis, and it's only going to become more acute as artificial intelligence (AI) takes jobs at both the higher and lower ends of the income/skills range.

It will be interesting to see how much Fed Jay Powell acknowledges this during the question-and-answer period.

Earnings Season: Big Boys Step to the Plate

Before Open:

• Caterpillar (CAT)
• Boeing (BA)

After Close:

• Meta Platforms (META)
• Alphabet (GOOG/L)
• Microsoft (MSFT)
• Chipotle Mexican Grill (CMG)
• ServiceNow Inc. (NOW)

Today’s Session

It's all about Nvidia (NVDA) and AI this morning, although there is a slew of earnings results out as well.

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