More Mixed Reversal Action as Earnings and Fed Decision Await
My best advice: know when your holdings will report and act accordingly.
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It was another mixed day of reversal rotational action on Tuesday, with breadth running close to even. The Magnificent Seven built on their recent bounce, with investors anticipating earnings from Meta (META) , Microsoft (MSFT) and Tesla (TSLA) on Wednesday after the bell.
Waiting on the Fed and Powell
While we wait on a potential leadership replacement update, the Federal Reserve will announce its interest rate policy, and Jerome Powell will hold a press conference. Current expectations are that the Fed will not make any significant policy changes, but it will be particularly interesting to see what Powell has to say as President Trump prepares to name his replacement at any time.
Investors are anticipating a dovish replacement for Powell, and that has likely been priced into the market to some extent, but the news is still likely to evoke a positive response.
Navigating Murky Earnings Expectations
The likely response to the earnings reports on Wednesday has grown somewhat murky after the big run-up over the last four or five sessions. A week ago, it looked like the market was well prepared for some disappointing news, but expectations have risen. This means there is a higher risk of a "sell the news" reaction if the reports aren't sufficiently upbeat.
The most significant area of concern is likely to be capital spending, which will impact the data center group. Data center names like IREN Ltd. (IREN) , Core Scientific (CORZ) and TeraWulf (WULF) were strong on Tuesday, suggesting they expected positive comments from Meta and Microsoft.
Positive Conditions Despite Volatility
The reverse rotational action has helped to create some healthy consolidation for smaller stocks. Overall market conditions remain relatively positive. The serial top callers are busy doing their thing, but there is nothing in the current price action to suggest that we are near a turning point. Watch for elevated volatility and be ready to pounce on opportunities that it may create.
My best advice right now is to make sure you know when your holdings will report earnings. Review these positions for possible modifications of your risk exposure.
Have a good evening. I'll see you on Wednesday.
At the time of publication, DePorre was long GOOGL, WULF and CORZ.
