ANALYSIS:

• Let’s first understand what happened yesterday, as we saw the dip get bought pretty strongly back to 5000 on SPX, and 433 on QQQ.
• We showed yesterday that money flows on QQQ had ticked higher. We could see that here:
• https://imgur.com/a/Ym3JhNl
• Furthermore, we got the fundamental boost from the news on UK CPI, as it came in soft taking the sting out of US CPI. Had that been hot we may have seen different price action.
• Finally, we saw VIX get crushed due to high delta ITM. This caused markets to push up, and since we had seen an increase in short positioning following US CPI, many fo those shorts covered, which pushed markets higher to 5000.
• Take a quick look at the positioning for 0dte today. We can see a big change today vs yesterday as shown in the images below. Calls are dominating the gex profile today, whereas yesterday puts were. The push yesterday had increased the gex across the option greek, and has helped to restore some confidence.
• https://imgur.com/a/TZbgm07
• Whilst this isn’t my personal analysis, I was reading somewhere the fact that technicals point to 5021 on ES being a key level to watch today, as it is the trend line since late January. I can see this as being possible to be honest, so we should try to watch this today too.
• I have shown you the technical set up I am referring to here:
• https://imgur.com/a/a4vmoBP
• A note on UK GDP today. It’s bearish for UK, but has actually helped equities in the short term as it has forced traders to pile into bonds, which has made yields fall and helped equities higher.
• Today we have Retail sales. Markets are expecting the data to come weaker than last time.
• We can see the dollar risk reversal here. Look at the gap widening. Dollar has been moving higher due to strong CPI and otherwise, but risk reversal has barely moved. Traders just aren’t buying it. Still expecting dollar to fall in medium term. I am one of them and have a number of positions against the USD.
• https://imgur.com/a/YBOhoRk
• Risk reversal on EUR and GBP in near term still positive.
• Gold looks ready for a bounce as I mentioned in another post. Has been under pressure of late, but skew for weekly and monthly expiry is starting to point up. It’s also holding above a key gamma level for the GLD etc at 183.5. If data can support it, we can hopefully see a reversal soon.
• https://imgur.com/a/kpFlp5d
• Quick look at AAPL:
• Skew is lower, but looks like it will trade just around 180-190 for a bit. 180 looks like a firm support and id expect a bounce up from there.

DATA LEDE:

• JAPAN GDP GROWTH:
• QOQ for Q4 came -0.1% vs forecast of 0.3%. Last quarter was -0.8%.
• Given the fact this is then 2 consecutive quarters of negative GDP growth, this means that Japan is now in a technical recession.
• YOY reading was -0.4%, worse than the 1.4% expected. Last quarter’s reading was revised down to -3.3% from -2.9%.
• Australia unemployment numbers.
• These numbers pointed to a weaker jobs market than expected. The jobs market in Australia is starting to soften.
• Unemployment ticked up to 4.1% vs forecast of 4%. Previous reading was 3.9%.
• Similarly, the number of new jobs placed was just 0.5k, far less than the 30k expected.
• This is now the second month in a row with a very weak jobs placed number.
• We are clearly seeing weakening in the jobs market in Australia, which will increase the chance of RBA cuts, which will pull the AUD down.
• UK GDP (Q4) – expected to be negative again, can point to technical recession.
• This expectation proved to be correct.
• QOQ GDP growth for Q4 was -0.3%, slightly worse than expectations for -0.1%
• However, UK was expected to have fallen into a technical recession last quarter, and this proved correct.
• The 3 month GDP average continues to worse. IT had moved lower from -0.1% in September, to -0.3% in December.
• UK growth not strong right now, although the recession is shallow for now.
• US Retail Sales (Jan) – expected to be negative for only the 2nd print in the last year.
• US Jobless Claims
• US Industrial Production (Jan)

———

MARKETS:

• SPX: Yesterday, market recovered from its post CPI sell off. This came as money flows picked up pointing to hedge funds buying the dip, helped by the fact that UK CPI came soft which took then sting out of US CPI.
  SPX closed above 5k again.
• Oil stocks lagged as EIA crude oil stocks change pointed to significant increases in oil supply.
• Nasdaq: Nasdaq also recovered. On Tuesday, the low of the CPI day was 17,500. It’s now trading at 17.,835, which means it is trading above where it was before CPI came out. Resistance on up side will be at 18k again.
• DJI: Dow recovery was less pronounced than SPX and Nasdaq, but has recovered around 400 of the 700 points it lost on CPI day.
• HKG50: quite flat today, opened lower by almost a percent, then recovered all of this in the 2nd hour. Tested 16k but got rejected.
• China flat at 11,530 as Chinese market closed for Chinese New Year.
• JPN market higher despite falling into technical recession. Money flows into Japan are very storng right now.
• GER40: Had totally recovered all of the CPI day sell off. Was basically a V shaped recovery fo those losses. Today, at market open, it got the volume to break 17k.
• With UK falling into technical recession, we are seeing traders buy German Bunds, which is dropping yields and propping up equities.
• OIL: Despite being higher at first yesterday, oil closed the day lower by 1%, back to the 76 level. Started dropping half an hour after market opened. This was around the time when EIA oil stocks data came out. Oil stock increase came out 12M vs 2.56M expected. Today, it went lower to 75s but recovered higher.
• GOLD: Flat in premarket
• US Bond Yields: Pared some of the bond yield gains yesterday on UK CPI coming in softer. Today it is slightly lower again ahead of Retail sales.
• VIX – yesterday crushed by 9% back to 14s. Today slightly lower again.

—————

CME FEDWATCH TOOL:

• Pretty much unchanged from yesterday, following hotter US CPI.
  Markets continue to price that there’s still a 60% chance that we won’t evne cut rates in May, thus pricing the first rate cut in June now.

———

Institutional research:

• Morgan Stnaley have the implied probability of a 10% sell off in S&P500 sometime in the next 6 months at 9%. This compares to Post 2008 average chance of a 10% sell off at 18%. Meanwhile, the implied probability of a 10% move higher in S&P over next 6 months is 19%. Pretty Bullish outlook

————

EARNINGS:

CSCO

• Cut 5% of its workforce. Said they will incur 800m charges in restructuring, due to severance.
• Revenue of 12.8B beat expectations by by 0.8%
• EPS of 0.87 beat expectations by 3.6%
• Q3 Guidance:
• Revenue guidance of 12.2B at midpoint missed by a wide 6.2%
• EPS guidance at midpoint, missed by 7.7%
• Full year Guidance:
• Revenue missed by 4.2%
• EPS of 3.71 was down 5% from previous guidance.

CROX:

• EPS of 2.58 beat by 8.9%
• Revenue of 960M was up 1% YOY, more or less in line .
• They grew in all regions and channels.
• Direct to consumer revenues were up 6.8%, but wholesale revenues shrunk 4.6%
• CROcs revenue was up 10% YOY, HeyDude were down 18%. Heydude accounts for around 20% of thier business.
• Trying o improve margins in HeyDude
• Expectations for next quarter:
• Revenues to be: -1/5 – 0.5% YOY
• EPS to be 2.15-2.25, a miss by 3%
• FULL YEAR:
• Revenue expected to be up 3-5%
• EPS expected to be 12.05-12.5, higher than consensus by 3%
• SO Some near term disappointment in EPS, but will be sorted and came in ahead of expectation for full year.

TWLO:

• Down on near term revenue miss. Also dollar retention rate contracted, and the number of active customer accounts fell QOQ.
• Revenue of 1.1B beat by 10%
• EBIT beat estimates by 36%.
• EPS of 0.86 beat by 53%
• Had 350k active customer accounts, compare dot 290k accounts in 2022.
• However, Q4 customer accounts are lower QOQ.
• Furthermore, Q4 dollar based retention rate came in at 102%, less than 110% last year.
• That’s not great.
• GUIDANCE:
• Revenue guidance of 1.035B at midpoint, misses expectations by 1.5%
• EPS of 0.56-0.6 beats expectations by 5.4%
• Slightly missed the EBIT estimate.

APP:

• Pumping on earnings as earnings forecast beats expectations, and they expand buyback program by $1.25B.
• Revenue came 953m, up 36% yoy, and beat expectation by 2.5%
• Positive net income whereas was in lost last year. Beat expectations by 40%
• Said holiday strength adn general growth in mobile app advertising. Advertising efficiency increased.
• Q1 revenue guidance beat by 6%

MAG 7:

• AAPL – Buffet very slightly trimmed his apple position. Trimmed by around 1%
• AAPL has been lagging a bit, yesterday all of its Mag7 peers were green, but Apple was red. Watch the 180 level as support.
• AAPl – are seeing returns on their Vision Pro.
• META & GOOGL – NYC sues social media platforms over teen mental health concern. The NYC lawsuit targets Facebook, Instagram, Tktok, Youtube and Snapchat.
• GOOGL down 1% on this, and the fact that OpenAI is developing a web search product, that will presumably be competition for Google.
• TSLA – Cathie Wood bought more shares of Tesla yesterday.
• META – announced that Broadcom CEO and former Enron Executive are joining board of directors.

COMPANY SPECIFIC:

• SMCI crosses 900 in after hours.
• UBER – Wedbush raises its price target on Uber to 85 up from 78. Said they are encouraged by strength of 3 year outlook and see Uber as best idea within mobility. Said buyback is another big move.
• Rundown of Uber investor day:
• Mid to high teens volume CAGR, beats expectations of 14.8%
• High 30-40% EBITDA CAGR, beats 36.5% expectation
• Conservatively $9.6B in 2026 FCF beats 8.2B consensus.
• Announced $7b buyback.
• MS – Morgan Stnaley to cut several hundred of jobs in Wealth management. That’s still less than 1% of the wealth unit’s employees though.
• PARA – down as Berkshire Hathaway dumps 30m shares in Q4.
• LMT – was down yesterday as 2025 Defence budget proposes an 18% cut in the number of F35 jets the pentagon buys.
• CSCO down following earnings miss and guidance miss, including 5% layoffs.
• TWLo down on near term revenue guidance miss.
• CLF down as they will idle their Weirton tinplate facility. Cut to equal weight from Overweight by Morgan Stanley, with price target 20.
• Yeti down on earnings after missing top and bottom line.
• NUS – down on earnings. They are seeing its revenue declines stabilize in the Americas and Mainland China, but its performance will remain challenging this year. The beauty and wellness company guides for a drop in 1Q and 2024 revenue while it further transforms its core business.
• PSX – expands board, names Elliott backed director to the board.
• CNHI yesterday was up after earnigns, after CFO announces $1b share buyback. Added 500m to the program. Said that restructuring plans will give 140-180m in savings. Said that high interest rates will soften construction end markets in N America and Europe, but that will be offset by Infrastructure spending in US. Europe farmer sentiment low but not critical, they said.
• APP – pumping on earnings as earnings forecast smashes expectations, and they expand buyback program by $1.25B.
• Revenue came 953m, up 36% yoy, and beat expectation by 2.5%
• Positive net income whereas was in lost last year. Beat expectations by 40%
• Said holiday strength adn general growth in mobile app advertising. Advertising efficiency increased.
• Q1 revenue guidance beat by 6%
• EPAM up on earnings – Q1 revenue guidance beats expectations by 10%. EPS guidance missed by 3%.
• STLA up on earnings. Announced a 3B euro buyback program
• Operating profit was down 10% in H2 due to North America strikes
• But cash flow was strong.
• Announced new EV launches.
• Raised dividend by 16%.
• Ford dragged higher by this.
• ARM and SOundhound are up as NVDA builds stake in the companies.
• ZBRA up slightly on earnings. EPS outlook for Q1 beat estimates by 18%
• Revenue decline of 18.5%.
• SOLAR companies – RBC says Solar sentiment is set to improve, and recommends First Solar and Others.
• HUBS – after strong earnings, where they beat expectations and pointed to strong long term growth, is up. Given overweight price targets by Barclays and Piper Sandler.
• ALB down on earnings – The decline in sales was driven by lower lithium market pricing, offsetting higher volumes in energy storage and an increase in volumes and pricing in Ketjen.
• Albemarle said its loss was driven by lower lithium market pricing and a lower of cost or net realizable value pre-tax charge associated with the pricing changes.
• KEYS – cu to neutral b JPM from overweight. Price target cut to 170 from 184.

OTHER NEWS:

• UK chancellor hunt has scaled back tax cuts as UK slips into recession.
• Note: Bank of America boosted their year end target for GBPUSd to 1.37 from 1.31 due to strong labour data and improving fundamentals. This comes despite UK entering technical recession today.
• Fed’s Goolsbee comments on inflation yesterday:
• Inflation target is 2% on PCE not CPI
• You want to look at 3 month, 6 months nd 12 month increments. IF you do that, its totally clear inflation coming down. I don’t support waiting for 12 month basis hits 2% to cut.
• Lagarde speech today: ECB has done well to anchor inflation expectations. However, not yet enough evidence on inflation returning to 2%. We don’t want inflation to rise again.
• They want to stay data dependent.
• Wages are becoming an increasingly important factor – strong wage pressures.
• Weakness in activity is across many sectors.
• More people in the UK are failing on their direct debits. The Direct debit failure rate rose to 1.07%, highest since data started.
• Q4 earnings misses in Europe haven’t been this bad in over 4 years says Bloomberg report. Seems slowdown in consumer demand is stifling profits.
• Japan and UK, the 4th and 6th largest economies in the world are now in technical recession.
• Japan has now been overtaken by Germany again for 3rd largest country int eh world.
• UK 10 year yields back at pre US CPI level as UK enters recession.
• Following the GDP numbers, the UK chancellor came out and said the low growth isn’t a surprise but UK is turning a corner.
• German companies in a survey are pessimistic on the economy, expecting it to shrink in 2024 by 0.5%. 35% of companies there expect business to worsen in next 12 months.
• NYC sues social media platforms over teen mental health concern. The NYC lawsuit targets Facebook, Instagram, Tktok, Youtube and Snapchat.
• ECB’s De Cos: points to decline in Spanish core inflation in January print as good news for ECB. Said that more time is needed to know the exact timing of rate cuts. This comes as Spanish Core CPI ticked down to 3.6% from 3.8% last month, in todays reading.
• White House advisor Brainard is expecting more progress on reducing inflation. Also said that public spending boost is helping the economy to achieve a soft landing.
• With UK falling into technical recession, we are seeing traders buy German Bunds, which is dropping yields and propping up equities.
• EU warns of natural gas stockpiling.
• Elon Musk’s SpaceX will transfer incorporation to Texas from Delaware.
• Janet Yellen says that Americans are starting to feel better about the economy, and said it’d be a big mistake to focus on 1 CPI report.
• Fitch said that the Fed will continue to fund own assets until the end of the year.
• Hamas says any deal will have to include a ceasefire, Israeli forces moving out of Gaza, as well as a significant prisoner swap deal.
• EU commission say that increased shipping costs should only have a minimal impact on inflation.
• EU commission cut the eurozone GDP growth forecast for 2024 to 0.8% from 1.2% expected in November.
• Japan Economy minister says that he expects BoJ to work closely with government to implement monetary policy to achieve price target. Wants to see age growth above inflation.
• Fed’s Barr says that its too early to say whether there will be a soft landing. Said Januarys report for CPI was reminder the path is bumpy. Want continued good data before rate cuts.