Bulls edge: Breakout or backtrack? 18/02/2025

HOT stories for today

US market wrap:
 

• The Nasdaq 100 and S&P 500 closed at new all-time highs, driven by strong Nvidia and the semiconductor sector performances, fueling the latest leg of the bull run. Investors remained confident heading into the three-day weekend, as the absence of Trump tariff comments or other surprises eased market jitters. Wall Street wrapped up a winning week, with the Dow Jones rising 0.6%, the S&P 500 gaining 1.5%, and the Nasdaq Composite surging 2.6%, powered by tech momentum.
• Among the S&P 500 sectors, four of eleven finished in positive territory, led by communication services, which gained 0.61%. Healthcare lagged, sliding 1.09%. Earnings season impressed, with fourth-quarter results standing out and only modest adjustments to first-quarter and full-year forecasts. With 75% of S&P 500 companies reporting, earnings are up 15.3%, according to LSEG, and 75% have beaten estimates, above the long-term average of 67%. The market’s upward momentum, driven by robust earnings and tech strength, highlights continued investor optimism.

Bull’s edge: Breakout or backtrack

• As U.S. investors return from the long weekend, the stock market appears primed to push into record territory, but a breakout could be followed by a deeper pullback due to seasonal headwinds, warns Jonathan Krinsky, technical analyst at BTIG. Krinsky notes that the S&P 500 is nearing a resolution of its multi-month trading range after closing Friday just 0.07% below its January 10 record of 5827.04. Despite resilience from strong earnings offsetting inflation and tariff concerns, its flat-topped flag pattern suggests a breakout may be imminent.
• However, Krinsky cautions that weak seasonal momentum could lead to a pullback into March, though bulls remain in control unless the S&P 500 dips below 6,000. His concern stems from market breadth: while the S&P 500 hovers near record highs, fewer than 60% of its components are above their 50-day moving averages, indicating limited participation in the rally. Additionally, small-cap stocks continue to underperform, with the iShares Russell 2000 ETF relative to the S&P 500 sinking to its lowest point since July.Despite these warnings, Krinsky sees bright spots, particularly in materials stocks, and he is also optimistic about casino and gambling stocks. The market stands at a critical juncture, with sector opportunities emerging amid broader uncertainty.

 
Stocks on the move:       

• Airbnb (ABNB): The stock surged 14.5% following the travel company's fourth-quarter results, which exceeded expectations. Airbnb reported earnings of 73 cents per share on revenue of $2.48 billion.
• Twilio (TWLO): Shares plunged 15% after the cloud communications company issued disappointing first-quarter earnings guidance. Twilio forecasts earnings between 88 cents and 93 cents per share, falling short of LSEG analysts' estimate of 99 cents.
• Applied Materials (AMAT): The chipmaker sank 8.2% after providing a weaker-than-expected revenue outlook, overshadowing its stronger-than-anticipated quarterly earnings.
• Palo Alto Networks (PANW): The cybersecurity company’s stock slipped 0.9% after reporting quarterly free cash flow below analysts' expectations.
• DraftKings (DKNG): Shares jumped 15.2% after the sports betting firm raised the lower end of its full-year revenue guidance, boosting investor confidence.

 
Today’s action
 

• Asia-Pacific markets mostly advanced on Tuesday following supportive comments from Chinese President Xi Jinping, who urged the private sector to showcase its “talents” in a rare closed-door symposium. Japan’s Nikkei 225 gained 0.56%, while the broader Topix index rose 0.53%. The Kospi climbed 0.55% in South Korea, and the small-cap Kosdaq added 0.37%. Mainland China’s CSI 300 edged up 0.22%, reversing earlier losses. Hong Kong’s Hang Seng index surged 2.09%, with the Hang Seng Tech index jumping 3.18%, rebounding from a more than 2% drop on Monday following Xi’s remarks.
• Meanwhile, U.S. stock futures started the holiday-shortened trading week positively. Dow Jones Industrial Average futures gained 37 points, or 0.08%. S&P 500 futures rose 0.2%, and Nasdaq 100 futures increased 0.29%. Earnings season continues, with results expected from Occidental Petroleum and Arista Networks later in the day.

Wahtclist: MDT, BIDU, DKNG, META, SMCI, TSLA, ANET, OXY

Bitcoin

• Bitcoin is struggling to gain momentum despite a sharp increase in market activity. Over the past 24 hours, trading volume surged by more than 51%, but BTC’s price remains nearly flat. Currently priced at $96,752.07, Bitcoin has dipped 0.21% on the day and 0.56% over the past week. The cryptocurrency has traded between $95,835.09 and $97,275.90 in the last 24 hours, signaling a phase of consolidation as traders gauge the market’s direction.
• Meanwhile, futures market activity is heating up, with open interest rising 1.42% to $61.18 billion, according to Coinglass. This increase suggests growing speculative bets, possibly anticipating a significant price move. Bitcoin’s current price action points to a market in flux. While the spike in volume and futures open interest hints at potential volatility ahead, declining market dominance and an imbalance in liquidations indicate lingering uncertainty among traders.
  Watchlist: Bitcoin: 89 000-108 000, Ethereum: 2200-3000, Solana: 180-276

Forex

• The Japanese Yen retreated after reaching a one-week high against the US Dollar but remained resilient as expectations for a Bank of Japan (BoJ) rate hike this year limited further losses. Additionally, a narrowing US-Japan yield gap, driven by growing bets on Federal Reserve rate cuts, provided further support to the Yen during the early European session on Tuesday.
• Meanwhile, the Euro weakened against the US Dollar, with EUR/USD extending its losses for a second consecutive session, trading near 1.0460 during Asian hours. The pair faced pressure as the US Dollar rebounded from three straight losing sessions, boosted by rising Treasury yields. Hawkish comments from Fed Governor Michelle Bowman, who highlighted persistent upside inflation risks and the need for more clarity before rate cuts, strengthened the greenback. Additionally, the Euro remained under pressure due to the European Central Bank’s projection of three rate cuts this year.
  Watchlist: EUR/USD: 1.0200-1.0550, USD/JPY: 153.6-158.80

Basic Materials

• Gold extends its gains for the second consecutive day, driven by concerns over a potential global trade war and expectations of further Federal Reserve rate cuts. XAU/USD trades around $2,913, up over 0.50% in the early European session. Safe-haven demand for bullion remains strong as investors worry that US President Donald Trump's proposed reciprocal tariffs could escalate trade tensions. Additionally, the prospect of lower interest rates from the Fed supports the non-yielding metal. Despite a modest recovery in US bond yields and a slight uptick in the US dollar, gold maintains its upward momentum.
• Meanwhile, West Texas Intermediate (WTI) crude oil rebounds to near $71.20 in the early Asian session, driven by supply disruptions following an attack on an oil pipeline pumping station in the Caspian Sea, which slowed flows from Kazakhstan. However, WTI's gains may face headwinds if potential ceasefire talks in the Russia-Ukraine conflict or easing trade war tensions weigh on market sentiment.
  Watchlist: GOLD 2600-2915, US Oil: 70.00-79.00

Key Economic Events Today:

EST time
08:30 am: USD Empire State Manufacturing Index
10:00 am: USD NAHB Housing Market Index
10:20 am: USD FOMC Member Daly Speaks
01:00 pm: USD FOMC Member Barr Speaks

Earnings

BMO (Before the US Market opens)
MDT               Medtronic Plc.
VMC               Vulcan Materials Comp.
BIDU              Baidu Inc.
ETR               Entergy Corp.

AMC (After the US Market closes): ANET, OXY, EQT, DVN

The TEFS Analyst team wishes you a successful day!