Interest rates continued lower which helped tech stocks to stage a strong bounce after a weak start of the new year. Most large-cap tech names gained 5-10% on low volume and made new highs. The performance of other sectors was far from impressive. Financials, biotech, and retailers finished near their weekly lows.
QQQ and SPY made higher lows and are setting up for a potential breakout near their all-time highs. It’s a different question if this breakout can follow through. It seems likely that we have entered a period of choppiness where many breakouts and breakdowns might fail.
Small caps IWM was flat for the week and continues to be down about 4% for the year. IWM needs to clear 197-198 to resume upside momentum. It might test its rising 50dma around 188 first.
The tensions in the Middle East led to a bounce in uranium, shipping, and military stocks. Vix and Gold also received a bid on Friday. It doesn’t seem likely that the situation will escalate and the market might be overreacting. This is why I wouldn’t chase those industries, at least not now.
The new earnings season is here. It started with a few big banks – JPM, BofA, Citi, Wells Fargo, an airline – Delta, and a health insurer – UnitedHealth. All of them sold off. Next week on deck is a bunch of more financials – GS and MS; also a couple of tech stocks like TSLA, NFLX, and ISRG. The earnings calendar gets a lot busier in a couple of weeks. The market tends to be choppy during earnings season as it digests new information. The market has priced in a few interest rate cuts for 2024, so stocks that miss earnings estimates are likely to be more vulnerable this quarter compared to last year when the Fed’s interest rate decisions and comments were the major driving force.