Weak Bonds and Poor Earnings Are Weighing on the Market Action
There's a growing nervousness in front of the PCE inflation news. Another hot inflation report is going to be difficult to ignore.
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Selling pressure on stocks is building on Thursday morning following a breakdown in bonds and a poor earnings report from DJIA component Salesforce CRM. Yields on Treasury bills are hitting their highest levels of the year, and the only major technology name that is still exhibiting solid relative strength is Nvidia NVDA.
Market participants are growing very nervous in front of the PCE inflation news that will be issued at 8.30 a.m. ET on Friday. So far in 2024, a pushback in interest rate cuts has not been a major problem, but market players are growing tired of the lack of Fed dovishness, and another hot inflation report is going to be difficult to ignore.
While Nvidia continues to hold up very well following its earnings, other big-cap names aren’t feeling as much love. In addtion to Salesforce, there have been poor responses to earnings from UiPath PATH, American Eagle Outfitters AEO, and Nutanix NTNX. There are no more Magnificent Seven reports to save the market right now.
Both the DJIA and the Russell 2000 IWM have already breached important support at their 50-day simple moving averages. The Dow is under the most severe pressure as CRM, which is the tenth largest weighting in the index, is being hit for more than 15% in the early going Thursday.
Without more earnings news, the AI momentum has cooled off, and there isn’t any major fundamental news to support valuations right now. On top of that, two weak bond auctions and growing concerns about an uptick in inflation have hit bonds hard and are causing worries about potential stagflation to bubble up.
We will see if dip buyers provide some support, but it is unlikely there will be much interest in front of the PCE on Friday, especially with poor earnings to digest.
My game plan is to tighten up stops and be much more selective with buying. I’m hoping for deeper pullbacks in some favorite names with upcoming catalysts, but so far, there hasn’t been much drama. Speculative trading in smaller names has contracted, but there are still a few pockets of momentum, such as AST SpaceMobile ASTS,
Stay vigilant and be cautious. The technical picture does not look good.
At the time of publication, Rev Shark was long ASTS.
