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Everyone can agree that Friday was not a good day for the stock market. That is perhaps why many participants seem to be agreeing this morning that they should buy that dip, which saw the major indices decline between 1.7% and 2.9%.
This is the Pavlovian response we have talked about before, yet the risk being run is that the market runs out of treats for this crowd after the opening bell rings. In other words, they will be expecting the price action to live up to their "can't lose" approach. If it doesn't, and the price action goes south so to speak, then today's session will take on a negative bent that runs afoul of the positive disposition currently seen in the equity futures market.
The S&P 500 futures are up 34 points and are trading 0.6% above fair value, the Nasdaq 100 futures are up 121 points and are trading 0.6% above fair value, and the Dow Jones Industrial Average futures are up 246 points and are trading 0.5% above fair value.
The tape is not without its positive news drivers.
- Apple (AAPL) announced plans to spend and invest more than $500 billion in the U.S. over the next four years.
- The uncertainty of Germany's election itself has been removed. Friedrich Merz is in-line to be Chancellor after his conservative Christian Democratic Union (CDU) emerged victorious.
- Berkshire Hathaway (BRK.B) reported some impressive fourth quarter operating results.
- Dow component Nike (NKE) was upgraded by Jefferies to Buy from Hold.
Notably, Apple itself is indicated modestly lower in pre-market trade, which is a heavyweight drag; however, there is enough of a buy-the-dip compulsion across the broader market to keep things on a positive track.
That will get us to today's open, but the matter of how the week closes looms large.
The reason being is that Dow component NVIDIA's (NVDA) earnings report after Wednesday's close looms large along with the release of the January Personal Income and Spending Report on Friday, which contains the PCE Price Index -- the Fed's preferred inflation gauge. Dow component Home Depot (HD) reports before Tuesday's open while fellow component Salesforce (CRM) reports after the close Wednesday along with NVIDIA.
There will also be several Treasury auctions, starting with today's $69 billion 2-yr note auction and continuing with a $70 billion 5-yr note auction on Tuesday and a $44 billion 7-yr note auction on Wednesday.
In brief, this week holds important market-moving potential and possibly increased volatility with important streams -- earnings reports from widely-held companies, economic data, and Treasury supply -- set to cross along with lots of policy talk out of Washington involving the reconciliation bill and trade.
Today will see a positive start, but by the end of Friday's session, there will be a much better sense for whom the bell tolls -- the bulls or the bears.
