Morning Notes — Banks
Covid-related economic disruptions should fade as we move deeper into the year, which may result in a fundamentally different macro environment than we’ve seen during other recoveries over the past 12+ years.
Covid-related economic disruptions should fade as we move deeper into the year, which may result in a fundamentally different macro environment than we’ve seen during other recoveries over the past 12+ years.
We continue to view the recent correction as bullish consolidation within an ongoing longer-term rally. However, the S&P 500 (SPX) will likely require a period of base building before it can moves through resistance of ~4,600. During that time, equity market volatility should have a
The rally from oversold has the S&P 500 (SPX) set up for a period of base building under the 4500-4600 breakdown area.
The focus was on MSFT/AAPL earnings and the Fed coming into the week. The two large Tech names reported solid Q4 results/better guidance, while the Fed’s neutral statement and hawkish press conference resulted in net-hawkish takeaways.
The ~11% correction in the SPX mostly matches the scale of recent past episodes when monetary accommodation was initially removed.
The stability seen over the past two sessions comes after the S&P 500 (SPX) reached oversold conditions after an ~11% decline from peak.
Markets will be focused on four items from tomorrow’s Fed meeting: a signal on liftoff beginning in March, guidance on tapering, balance sheet plans and language used the press conference.
The near-term path of least resistance is still aimed lower, but important to watch for a developing bullish narrative with sentiment readings now in extreme bearish territory.
The main driver of the sell-off has been sharply higher bond yields at the start of the year. The yield backup has been driven by expectations for a more aggressive tightening cycle based on Fed rhetoric.
Yesterday’s afternoon fade in the S&P 500 (SPX) looked like CTA selling and it’s important to see if the SPX can hold early gains without incremental drivers to shift the narrative.