Daily Brief - Wall Street's Wake-Up Call

TLDR: Markets faced a harsh return to reality as January's CPI data exceeded forecasts, causing stocks and bonds to tumble.

This unexpected inflation report sent equities retreating from their recent peaks and pushed Treasury yields to new heights, casting doubts on the anticipated Fed rate cuts. The stock market’s “fear gauge” — the VIX — also surged the most since October.

The CPI surprise has not only jolted expectations but also rekindled concerns over inflation's stubbornness, contradicting the recent optimism that led to speculation about imminent rate reductions by the Federal Reserve.

With the S&P 500 experiencing its most significant CPI day drop since September 2022, and rate-sensitive sectors like homebuilders and banks bearing the brunt of investor angst, the market's reaction underscores the precarious balance between growth, inflation, and monetary policy.

Swap traders, now recalibrating their bets, have significantly lowered their expectations for a Fed cut before July, reflecting a newfound caution amidst financial markets.

Market Movers: When the VIX jumps?

Here are the best and worst performing SPX stocks on a 1-month basis based on previous episodes when the VIX jumped:

The top 3 performing stocks:

1. Enphase Energy (Ticker: ENPH) with a 1-month return of 6.32%
2. Moderna Inc (Ticker: MRNA) with a 1-month return of 4.98%
3. Diamondback Energy (Ticker: FANG) with a 1-month return of 4.78%

The bottom 3 performing stocks:

1. Fox B (Ticker: FOX) with a 1-month return of -1.30%
2. Carmax (Ticker: KMX) with a 1-month return of -1.15%
3. AMD (Ticker: AMD) with a 1-month return of -0.76%

Earnings Update: Occidental Petroleum reports tonight

Occidental Petroleum (OXY) is anticipated to report a year-over-year decline in earnings for the quarter ended December 2023, with expectations set for lower revenues as well.

Analysts have predicted that the company will post quarterly earnings of $0.82 per share, representing a decrease of 49.1% compared to the same quarter last year. Revenue is also expected to fall by 13.4% to $7.21 billion from the year-ago quarter.

Discover how other companies could react post earnings with the help of TOGGLE's WhatIF Earnings tool.

Asset Spotlight: Alphabet A at a resistance level

In the 5 past occurrences when Alphabet A's price was at the top of its range, analysis from Toggle indicated a pattern of a median downward movement in the stock price over the next 3 months.

However, historical data indicates that when there is a one-day surge in the VIX, Alphabet's stock often experiences a positive impact, with an average increase of 2.26% over the following month.