The market began last week with extreme caution, but it's now closer to ‘extreme fear.’

Friday’s Fiery Finish

Only Energy (XLE) closed higher on Friday, as interest-rate-sensitive sectors took it on the chin. There was a fair amount of bottom fishing, which is a dangerous game. Moderna (MRNA) was the top mover on Friday, getting hammered this morning down 18% on new guidance ahead of the open.

Heat Map

Some “Mag Seven” names led an early rebound attempt, but it was clear an hour before the close that sellers were in control.

Select retailers held up well, but that’s about it.

Factors

Small-caps were hammered as higher for longer rates snuffs out hopes of avoiding that so-called maturity wall.

The iShares Russell 2000 ETF (IWM) faces a major test of holding above its 200-day moving average.

The question is, has the game changed?

Bank of America (BAC) suggests it has, as the bear steepening (long-term rates rising faster than short-term) reflects a shift to “boom” from “recovery,” which historically benefits commodities over stocks.

Heading into the election, there was a near-zero percent chance of a rate hike in the next twelve months. Now, it's 35% and climbing fast.

I do not think this is a “boom” period, but favorable assumptions on copious rate cuts have undoubtedly faded, sending everyone back to the drawing board.

This week, major bank earnings kick off earnings season.

So much is riding on earnings, driving this market higher this year.

Today’s Session

The S&P 500 and other major indices are far enough below their 50-day moving averages, the focus must shift to the downside potential. There are pockets of support, but the next big test looks like $5,700.  

It's all about treasury yields, particularly the ten-year, which continue to power higher.   

Comments

I'm confused as to what the last graph S&P 500 earnings is showing.... S MP has done well the past 2 years not sure again what this is showing could you explain Pete D on 1/13/2025 8:28:58 AM

For Q4 2024, the estimated earnings growth rate for the S&P 500 is 11.9% which marks the highest (year-over-year) earnings growth rate reported by the index since Q4 2021 of 21.4%. Karina Hernandez on 1/13/2025 11:25:29 AM

I am concerned with credit card and home defaults affecting the banking system. I have noted what I think is more home for sale signs. Need real data on delinquencies. Alpo H Kallio on 1/13/2025 9:04:20 AM

Speaking of delinquencies, Trump promised temporary 10% cap on credit card interest. While really helping people who need it most, it's not going to help banks bottom line Pat on 1/13/2025 10:11:30 AM

Hey, Senator Tim Scott, Please designate California as an Opportunity Zone so I can invest in the renaissance. Tim in Texas Tim in Texas on 1/14/2025 11:58:11 AM

Can't we just swap out Greenland for California and keep 50 stars on the Flag? Tim in Texas Tim in Texas on 1/14/2025 12:00:07 PM

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