We noted yesterday that the market’s nine-week win streak came to an end because of weakness in small-cap stocks and mega-cap stocks. Guess which stocks led yesterday’s rally effort? Yes, indeed, it was the small-cap stocks and mega-cap stocks in what looked to be a mechanically-controlled rebound effort.<\/p>\n\n\n\n
We say the latter knowing that the charts for the Nasdaq Composite, Russell 2000, and S&P 500 all tracked on a smooth line up and to the right and finished pretty much at their highs for the day. The Nasdaq gained 2.2%, the Russell 2000 gained 1.9%, and the S&P 500 gained 1.4%.<\/p>\n\n\n\n
The good rebound times, however, are not expected to keep rolling at today’s open. Currently, the S&P 500 futures are down 27 points and are trading 0.6% below fair value, the Nasdaq 100 futures are down 140 points and are trading 0.8% below fair value, and the Dow Jones Industrial Average futures are down 198 points and are trading 0.5% below fair value.<\/p>\n\n\n\n
This turn of events has some news behind it and some price action behind it.<\/p>\n\n\n\n
The news of note includes a Q4 revenue warning from Microchip Technology (MCHP)<\/strong> that was tied to a weakening economic environment, and Samsung Electronics indicating its Q4 operating profit will be down 35% year-over-year and below analysts’ expectations.<\/p>\n\n\n\n The semiconductor space, which had a nice rebound yesterday, should see some selling activity as a result of these announcements, but an important offset will be the continued strength in NVIDIA (NVDA)<\/strong>, which is trading 0.3% higher in pre-market action.<\/p>\n\n\n\n NVIDIA is the only Magnificent 7 stock trading higher. The negative price action in the other six is a factor for the weakness in the equity futures. We would add, too, that Netflix (NFLX)<\/strong> is down 1.8% after being downgraded to Neutral from Buy at Citigroup.<\/p>\n\n\n\n Another factor for the weakness is the continued fallout in Boeing (BA)<\/strong> over the 737 MAX 9 plug issue. Shares of Boeing, which dropped 8.0% yesterday, are down 1.1%, this morning.<\/p>\n\n\n\n Some attention is also being diverted to the 10-yr note yield holding stubbornly above 4.00%. It is currently at 4.03% after touching 3.96% at its low in yesterday’s trading session. It would be remiss not to mention that the yield on the 10-yr note was nearly 100 basis points higher less than three months ago. Where it stands today isn’t a major factor in the disposition of the equity futures market, but where it stands after Thursday’s release of the December Consumer Price Index will be.<\/p>\n\n\n\n Treasuries are digesting remarks from Fed Governor Bowman (FOMC voter), who walked a middle ground in saying that it would be appropriate to cut rates should inflation fall closer to 2%, but in her view “we are not yet at that point.” The 2-yr note yield is up three basis points to 4.38% in front of today’s $52 billion 3-yr note auction at 1:00 p.m. ET.<\/p>\n\n\n\n Separately, the November trade balance was better than expected, showing a deficit of $63.2 billion (Briefing.com consensus -$64.7 billion) versus a downwardly revised $$64.5 billion (from -$64.3 billion) in October.<\/p>\n\n\n\n The key takeaway from the report is that exports were $4.8 billion less than October exports while imports were $6.1 billion less than October imports. The drop in both exports and imports fits with a weakening global economic environment.<\/p>\n\n\n\n —<\/p>\n\n\n\n