Stock futures are pointing to a modestly higher open as they look to rebound from yesterday’s afternoon sell-off. The downturn was set in motion by a call for more sanctions against Russia over the Crimea issue. There could also be a rebalance ahead of the end of the quarter as the rotation out of recent ‘high fliers’ could signal some profit taking. Today’s move higher comes ahead of data seen as set to show an upward revision to growth (GDP) , as well as more good news on jobless claims. There is also plenty of Fed-speak on the schedule as many officials are due to speak. Volatility rose sharply as stocks weakness gained steam throughout Wednesday’s session. The CBOE Volatility Index (VIX) was up by 10% but is still relatively low given all the swings we have seen recently. It will be interesting to see if the Bulls can muster another ‘Buy the Dip’ rally into weakness but something tells me the party may be over soon.
Treasuries are relatively flat this morning after surging higher on the equity slide yesterday. The 10-year yield is at 2.7% but recent action has shown a flattening of the yield curve which could signal more stock weakness ahead. European stocks have recovered after being lower earlier on continued concerns about the Ukraine crisis. Factors that may be boosting sentiment are a deal to bail out Ukraine, higher than expected retail sales in the UK and a surprising increase in French consumer confidence. Asian shares were mixed but Japan showed strength as the Nikkei was up 1%. Today could get interesting if stocks begin to fail again. Small caps (RUT) led yesterday’s slide and are typically the directional leaders for the markets. Watch for strength in Bonds as an indicator for any weakness in equities.
Stock Stories:
Citigroup (C) –Not a Chance – The Banking giant’s capital return plan was rejected by the Fed for "qualitative" reasons. One wonders whether this disappointment wasn't already priced in as Citi has underperformed this year, and for some time been the only one of the major banks trading below book value. C shares are down 5% ahead of the opening bell.
