Market 01/29: SPX market continues to test 4900 ahead of the first turbulent week

SPX 4900 on low liquidity, traders prepare for February

February IV rises across the board showing hedging demand emerging, especially risks from FOMC this week

4900 becomes immediate call wall and initial resistance after last week with 5000 considered the market top at the upper end
- However, lower support is clearly completely empty with risk-off level at 4800

Market continues to test SPX 4900 level for the 4th time this morning with sentiment assessed as follows:

From Steve - with volatility continuing to be suppressed, current market:

Bullish above 4900 with target 5000 and cap at 5000 using Credit Spread
Range trade / Sideways at 4900 - 4800, can buy the dip near 4800
Below 4800 market turns bearish

Market analysis for the new week:

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China: real estate black hole and efforts to save the stock market

Evergrande officially dissolved: Real estate may sink the economy

On 01/29, Hong Kong court officially rules to dissolve China real estate group (real estate) Evergrande

Evergrande's case so far is the largest collapse in China's real estate crisis.

Evergrande's USD-listed bond valuation down to ~1.5 cents → market pessimistic about debt repayment ability.

Evergrande shares drop -20% right after the news and trading immediately halted.

Evergrande's collapse continues to pose many challenges to China's already dismal real estate market

China's Real Estate Index has dropped -85% after 2 years.

China's debt and stock markets both in red alert - government efforts to save the market

On the stock market:

P/E of Chinese stocks drops to 8 - lowest valuation in a decade

Faced with stock short selling, China suspends "lending" of certain stocks to limit further severe declines.

On the debt market:

Total value of corporate bonds maturing in 2024 reaches record high ~6.8 trillion CNY (~945.53 billion USD), up +20% Y/Y.

Bank-held bad debt reaches ~7.6 trillion CNY at end of September 2023.

Texas manufacturing activity collapses in January

Dallas Fed Manufacturing Outlook index drops from -9.3 to -27.4 (much lower than expected -11) - back to post-COVID lows.

Production index - main measure of production conditions, drops 17 points to -15.4 - lowest since mid-2020.

Other measures of manufacturing activity this month also show declines:

New orders index: down from -10.1 to -12.5
Capacity Utilization index: down to the lowest level in many years at -14.9.
Transportation index: -16.6

Assessment of business conditions continues to worsen + Wage costs and input material costs continue to rise

Amazon and iRobot merger deal canceled

Amazon and iRobot terminate merger plan due to opposition from EU antitrust regulators.

This M&A deal was previously valued at 1.4 billion USD

iRobot has announced a major restructuring plan to cut costs:

Cutting about 31% of workforce, equivalent to 350 jobs
Founder Colin Angle has also stepped down as CEO.

IRBT stock down more than 30% - to the lowest level since 2009 after the news

Q4 FY23 earnings update: SoFi

Customer count +44% to 7.5 million.
Deposits +18% Q/Q to $18.6 billion.
Revenue +35% Y/Y to 615 million USD (beat estimates by 23 million USD).
Adjusted EBITDA 181 million USD (margin 30%, +15 pp Y/Y).
Non-GAAP EPS: 0.02 USD (missed estimates by 0.02 USD).
FY24 EBITDA guidance ~585 million USD.

Key events next week

JOLTS job openings data - Tuesday
CB Consumer Confidence - Tuesday
Fed interest rate decision - Wednesday
ISM Manufacturing PMI data - Thursday
January jobs report - Friday
~20% of S&P 500 companies reporting earnings this week

Earnings reports from notable stocks:

Monday: $SOFI.
Tuesday: $AMD, $GOOG, $MSFT, $MTCH.
Wednesday: $ALGN, $MA, $NVO, $QCOM.
Thursday: $AAPL, $AMZN, $META, $TEAM.

Other news

US expected to announce billions in subsidies for chip industry:

Intel has projects underway in Arizona, Ohio, New Mexico, and Oregon with total cost over 43.5 billion USD.

BYD Co.'s full-year 2023 profit rises thanks to surging EV sales—but misses analyst expectations due to price war in China
- FYI: Viet Hustler's analysis of the EV market.

US Department of Energy issues regulations requiring energy efficiency in operations using gas and electric cooktops and ovens,
- … effort to limit greenhouse gas emissions from household appliances.