Troops were on the move. Not a lot of troops. Enough, though, to send a message.
I had seen the news earlier in the day. Financial markets wobbled just a bit on the mid-morning headline in New York, but had regained their footing by lunchtime. Market sentiment had been damaged earlier by a January ADP Employment Report that showed job destruction of 301K private positions across the U.S. for the past month, well below the approximate 200K worth of job creation that economists were looking for.
Markets would find a way to cross the finish line strong, at least at the index level, but breadth had suffered. The "victory" was narrow in nature, leaving traders in no position to tackle disappointing earnings results, which is exactly what they got from Meta Platforms ( FB) , or disappointing guidance, which is what they got from Spotify ( SPOT) . Sold to you, said high-speed algorithms to those too slow to get out of the way. In seconds, newly created green daily candlesticks melted before our eyes.
President Biden has ordered an additional 1,700 troops from the 82 Airborne Division to Poland, and 300 troops from the 18th Airborne Corps to Germany. These troops will deploy from Fort Bragg, North Carolina. The president also ordered 1K troops from 2nd Cavalry Regiment, already based in Germany, to move into Romania to augment 900 U.S. soldiers already in that nation.
The goal is to demonstrate U.S. resolve without discouraging ongoing efforts to find a diplomatic solution to the crisis created by the roughly 120K Russian troops massed on the Russo/Ukrainian border. Notably, the U.S. has not posted any U.S. military personnel inside Ukrainian territory itself, and not inside NATO member nations located in the Baltics -- Estonia, Latvia, or Lithuania, all former Soviet states, all bordering either Russia proper or Russian ally, Belarus.
Deceptive Day
On the charts, Wednesday, for the most part, looks like the fourth day of a bullish reversal off of market lows created intraday on Friday. The two broadest and most closely tracked large-cap indexes, the S&P 500 and Nasdaq Composite, gained at least half of one percentage point for the session.
The S&P 500 reclaimed its 21-day exponential moving average (EMA) on Tuesday, and its 100-day simple moving average (SMA) on Wednesday. The 100-day SMA is not the portfolio manager provocateur that either the 50-day or 200-day lines are, but enough folks do follow it. The Dow Jones Industrial Average, which in some circles is still considered a "major," even managed to retake its 50-day SMA on Wednesday.
Even the Dow Transports and Nasdaq 100 tagged along for the northerly ride. Ten of 11 S&P sector-select SPDR ETFs closed the day in the green, which is where the fun stops. Four of the top-five spots on the daily sector performance table were taken by defensive types, with cyclicals taking the bottom five. Discretionaries ( ( XLY) ) finished in dead last, and in the red as autos, gaming, travel and lodging all took nasty hits. Beneath the large-caps, equities were a mess. The S&P MidCap 400 closed virtually unchanged, while the Russell 2000 was slapped around for 1% contraction.
Losers beat winners at the NYSE by roughly 9 to 7, and by a more convincing 5 to 3 at the Nasdaq. Aggregate trading volume declined at the corner of Broad and Wall Streets, where advancing volume took 46.1% of the composite. Aggregate trading volume moved sideways (close to unchanged), as advancing volume took a 41.1% share of the composite up at Times Square.
Tech-Ageddon
It didn't take long. Facebook, I mean Meta Platforms, is not one of those names that makes investors wait for a half hour to an hour after the closing bell when reporting. Meta failed to add monthly users in the fourth quarter and pointed toward a less-than-captivating future. The firm repeatedly mentioned competition and the ByteDance app TikTok. The changes made to Apple's ( AAPL) IOS have also limited how Meta can gather data and target advertising. This alone could cost Meta a cool $10B in revenue over a full year. Then Spotify projected slower-than-expected growth for the current quarter.
The overnight rout was on. Collateral damage was broad. Not only were "innocents" such as Amazon ( AMZN) , which is yet (tonight) to report, hit hard, but so were Qorvo ( QRVO) , which had not reported a bad quarter, and Qualcomm ( QCOM) , which had reported a very good quarter. Even Tuesday night's winners -- Alphabet ( GOOGL) and Advanced Micro Devices ( AMD) -- took a Wednesday-night beating.
Trader's Note: As with GOOGL 24 hours ago, readers will see a long position in FB down in the disclaimer. This is the result of overnight trading. I did not go into the numbers long the name, and do not like the name long-term. This is just the mercenary sport of trading, and so far so good.
Prepare for a Mess
The Bureau of Labor Statistics will report the January employment situation on Friday for public consumption. We already know what the ADP Employment Report showed for the month in terms of private-sector hiring. We already know that the administration and our central bank alike are cautiously working their way toward Friday.
Blame Omicron? For good reason. The surveys (establishment and household) were taken the week of Jan. 12, which was smack dab in the middle of the post-holiday season chaos where thousands of people in need of a test could not even find one, and clinics had to close due to staffing shortages.
Earlier this week, Philadelphia Fed President Patrick Harker, appearing on Bloomberg TV, said "We're probably going to have a bad jobs report in the end of the week. I mean because of omicron." Economist Brian Deese, who is director of the president's National Economic Council, appeared on MSNBC, and said, "We never put too much weight on any individual month; this will be particularly true in this month, because of the likely effect of the short-term absences from omicron."
It seems like just a week ago that Fed Chair Jerome Powell referred to the labor market as "strong," doesn't it? It was. Now, economists, traders, investors, and the public are just not quite sure what to expect, or what they are looking at. I came into the week with an expectation for 174K jobs created in January. Consensus appears to be in the 140Ks at this point and heading south. The range of professional expectations now seems to be for anywhere from -400K to +250K, and don't forget, these are seasonally adjusted numbers. January is commonly a month of job destruction and not job creation as seasonal positions regularly terminate at that time of year.
For instance, one year ago, the headline number for January 2021 Non-Farm Payrolls hit the tape at +233K after adjustments. The unadjusted, or honest number for the month was -2.6M+. One big reason why I think more focus should be out on unadjusted data.
Sure, seasonal adjustments might smooth things out and in the end, sums should equalize, but what are we? A bunch of morons? Unadjusted data tells the real-time story. Adjustments put the actual situation, that might require increased urgency or a highly focused response, behind a veil of opacity. This helps no one -- except those that might benefit from a lack of transparency.
Swimming Upstream
Equity index futures are trading lower. Tech is leading the way down.
Health insurers could be hot this morning. The Centers for Medicare & Medicaid Services published its proposed 2023 payment policy changes for Medicare Advantage and Part D drug programs. What is under consideration is a roughly 8% increase in payments for private Medicare plans (serving 27M individuals). The 2023 Advance Notice indicates an effective growth rate of about 5% for Medicare Advantage plans.
Humana ( HUM) , UnitedHealth ( UNH) , and Anthem ( ANTM) have been hot tickets overnight, while Cigna ( CI) has sold off.
Economics (All Times Eastern)
08:30 - Initial Jobless Claims (Weekly): Expecting 247K, Last 260K.
08:30 - Continuing Claims (Weekly): Last 1.675M.
08:30 - Unit Labor Costs (Q4-adv): Expecting 1.4% q/q, Last 9.6% q/q.
08:30 - Non-Farm Productivity (Q4-adv): Expecting 2.9% q/q, Last -5.2% q/q.
09:45 - Market Services PMI (Jan-F): Flashed 50.9. .
10:00 - ISM Non-Manufacturing Index (Jan): Expecting 59.4, Last 62.0.
10:00 - Factory Orders (Dec): Expecting -0.2% m/m, Last 1.6% m/m.
10:30 - Natural Gas Inventories (Weekly): Last -219B cf.
The Fed (All Times Eastern)
Today: Senate Banking Committee hearing on the nominations of Lisa Cook and Philip Jefferson to the Federal Reserve Board of Governors, and Sarah Bloom Raskin to the position of Vice Chair for Supervision.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: ( BDX) (2.84), ( CI) (4.71), ( LLY) (2.51), ( EL) (2.63), ( HSY) (1.61), ( MRK) (1.51), ( RL) (2.19)
