Markets Looking to Stall...
Volatility Continues to Flatten
KR Opinion
It would have been a very boring day if it weren't for the semiconductors. We did see some hits on some of the major stocks, with Tesla down 7.2% and Apple down 2.5%. Without a doubt, the semiconductors were leading the way, as we saw NVDA, TSM, AMD, ASML, and INTC, just to name a few, up between 2% and 3.6%.
Across the board, the semiconductors and equipment group was up 1.77%, clearly leading today even though the session was very lackluster, with the S&P and the NASDAQ drifting slightly south.
As we come into this week, we're starting to get close to some of the material news that's likely to come out, specifically on Wednesday, Thursday, and now noting that the unemployment numbers are due on Friday.
As I have been discussing, I believe that the markets are just about to enter into a consolidation phase and I've been talking about this for a while. The first week of March is likely to be when we start some type of backfilling.
I'm starting to see some technical and quantitative situations to suggest that we're likely to see markets start to churn at these levels. The downside still appears limited, but on the upside, there's still some reasonable upward momentum, and the configurations continue to suggest overall positivity from the standpoint of not seeing any kind of collapse in prices.
Certainly, I don't believe any of the news that we're likely to see this week, including the employment numbers on Friday, is likely to trigger any major sell-off or rally as far as that goes. We're just likely to see a really choppy sideways week. In the technical section below, I will lay out some of the parameters I'm seeing set up now.
Looking Back on Monday’s Action
The S&P 500 and Nasdaq Composite initially rose above their previous closing levels but soon dropped to the day's lows, influenced by the downturn in major technology stocks. For instance, Meta Platforms, Amazon.com, and Microsoft all saw early gains during the session but eventually ended lower.
On the other hand, some large-cap stocks like Apple and Tesla experienced declines throughout the day, significantly affecting the indexes. Apple's shares fell due to a hefty EU fine for monopolistic practices, while Tesla's decline was linked to a reported decrease in shipments from its China factory.
Despite these losses in significant stocks, the broader market remained relatively stable. The Invesco S&P 500 Equal Weight ETF managed a slight increase of 0.2%. Market sentiment was cautious, especially with upcoming earnings reports from major retailers such as Target and Costco, as well as Broadcom. The economic agenda includes the February ISM Non-Manufacturing Index and the February Jobs Report.
Federal Reserve Chair Powell's upcoming testimony before Congress is not anticipated to bring surprises, with expectations that he will maintain the current stance on interest rates. Atlanta Fed President Bostic supported this view, noting that although inflation has slowed, price pressures persist.
The communication services sector saw the most significant losses, driven by decreases in Alphabet and Meta Platforms, making it the poorest performer in the S&P 500.
The consumer discretionary sector also struggled, impacted by Tesla's sharp decline and Amazon.com's weakness. These sectors, which comprise nearly 20% of the index, were notably affected. The energy sector also fell as crude oil prices dropped. There were no significant US economic data releases today.
Tuesday's economic schedule includes:
- At 9:45 AM ET: The final S&P Global U.S. Services PMI for February, previously reported at 52.5.
- At 10:00 AM ET: January's Factory Orders, with a KR Forecast consensus of a 2.5% decrease, following a previous increase of 0.2%.
The February ISM Non-Manufacturing Index is also expected, with a KR Forecast consensus of 52.7%, compared to the previous 53.4%.
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