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Stocks Dive From Overbought as Fed Downplays March: Market Trends
David Russell
February 1, 2024

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Sizing Up the S&P 500

  • Index -1.6% yesterday, biggest drop since September 21.
  • Potential levels:
    • 4800 (weekly peaks in December, early January)
    • 4765 (50% retracement of breakout above July high)
  • RSI falling from overbought, returning into Keltner Channel.
  • Potential catalysts:
    • Non-farm payrolls tomorrow
    • CPI on 2/13
    • Fed minutes on 2/21
S&P 500, daily chart, showing key patterns and indicators.

Key News

  • Hawkish news:
    • December JOLTs job openings 9.03mln vs 8.75mln est. November revised up.
    • Fed wants more confidence before cutting rates. Powell downplays March.
  • Dovish news:
    • Chinese manufacturing remains in contraction.
    • U.S. Treasury planned issuance 6% below estimates
    • Crude-oil, gasoline inventories increase
    • Q4 employment cost index +0.9% vs +1% estimate
  • Tesla (TSLA) sees $10 billion of capex, partly to build superchargers.
  • Good bank, bad bank:
    • Oppenheimer: BAC, C, JPM, MS, UBS are “significantly undervalued”
    • New York Community Bancorp (NYB) craters on unexpected loss, dividend cut (resulting from acquisitions of Signature Bank, Flagstar Bank).
  • Consumer confidence at 2yr high on inflation, employment optimism.

Mover of the Week: Photronics PLAB

  • Photomasks for semiconductor production
  • 12/13: Stronger demand in April, July fiscal quarters forecast
    • Management cited chip cycle upswing (echoing SIA)
    • Bloomberg: U.S. chip restrictions boosting Chinese demand for chip-capital equipment
  • PLAB trades for 15x EPS, 2x sales.
    • Rivals like AMAT 20x, 5x. LRCX 28x, 8x.
  • PLAB +55% in last year

Upcoming Events

  • Earnings this afternoon: AAPL, AMZN, META, MCHP
  • Fri 2/2: Non-farm payrolls
    • Earnings: XOM, CVX, ABBV
  • Mon 2/5
    • Earnings: CAT, MCD, ON, PLTR
  • Tue 2/6
    • Earnings: F, LLY, AMGN, ENPH
  • Wed 2/7
    • Earnings: BABA, UBER, ARM, DIS, PYPL

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About the author

David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.