Markets at Critical Point as Investors Brace for Delayed Jobs Data
Here's the primary question Wednesday as speculative steam fades in bitcoin and software.
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The market is at an important juncture on Wednesday morning as the recovery from last week’s corrective action slows and economic news awaits. AI-related names, software, high-PE stocks, cryptocurrencies, and the Magnificent Seven have all bounced back to varying degrees, but are running out of steam as investors await the January jobs announcement.
Speculative Steam Fades in Crypto and Software
Bitcoin (IBIT) provided a good illustration of speculative interest. It hit a high back in October, dropped sharply until it found some support in November, and then plunged again in January. The earnings report from MicroStrategy (MSTR) last week helped to trigger some bounce action, but it is rolling over again and the recent lows may be tested.
The key issue here is that support looks soft and there doesn’t appear to be a news catalyst on the horizon that will help. The same dynamics apply to other high-beta areas of the market like AI software. Take a look at Palantir (PLTR) for example, which bounced a bit but reversed on Wednesday and is indicated lower Wednesday morning. Recent lows are back in play again.
Big Tech Struggles Despite Earnings
Some of the Mag 7 names, such as Alphabet (GOOGL) and Meta (META) , which had the best earnings reports, are also acting poorly. The recent lows are in play in both cases. The lack of follow-through after solid numbers suggests that the market is more focused on broader macro pressures than individual company performance.
Jobs Report and the Fed’s Next Move
The primary question for investors Wednesday morning is whether the January jobs report, delayed by the recent government shutdown, will provide support. Expectations are for very anemic numbers, with just 55,000 jobs added in January. Retail sales numbers were soft on Tuesday and there is growing concern about economic growth.
Slowing economic growth may increase the likelihood of a Federal Reserve interest rate cut, but with a new Federal Reserve chair transition imminent, such a move is already widely anticipated. There is roughly a 75% chance of a quarter-point cut or more by the meeting in June, but that could tick higher on a poor jobs report. CPI is coming on Friday, and if that is cool, then those odds will go up.
Strategic Game Plan
The economic uncertainty, combined with the continued rotational action in the AI sector, is a market headwind that could give the bears ammunition if key technical levels are tested. I’m watching my positions closely and prepared to cut some more exposure on deteriorating technical support.
We have a slightly soft open to start the day.
At the time of publication, Rev Shark was long GOOGL and META.
