00:00 Rogie, welcome to Benzinga's Pre-Market Prep. How are you doing this morning?
00:03 Good morning. How are you doing? Good to see you both.
00:06 I'm good. Yeah, I think this is our first time getting to chat.
00:08 So I know we were talking a little bit this morning. We've got a busy week. We got the JP
00:14 Morgan Healthcare Conference. We've got financials reporting later in the week.
00:18 What are you seeing that's catching your eye?
00:21 The first, I was listening to you guys talk about a little bit of that January effect,
00:25 and I love that you're talking about it because so much of December was window dressing, Santa
00:30 rally. And so seldom do we look at the other side of window dressing, which is at some point,
00:36 all that stuff has to come back out of that big window. And you have this window undressing,
00:42 kind of unraveling. And I wasn't sure if we'd see broader participation where semis and tech
00:49 could rally with energy and healthcare, but instead we're seeing some sector rotation.
00:54 We're seeing those leaders, some profit taking, and we're seeing some classic movement into those
00:59 laggards from 2023. So nothing weird so far with as weird as 2023 was, 2024 right now is for me,
01:08 feeling like a little bit of a warm hog. There's some familiarity here. So I'm very optimistic
01:12 about the year. Do you think this weakness continues,
01:16 or is this a buying opportunity for 2024? There's two really interesting things at JP
01:22 Morgan and health conference, financial and healthcare sector. If financials can continue
01:27 with that rally into earnings and post earnings starts to just accelerate, the SMP has got to go
01:33 with the waiting that financials have in it. If healthcare can keep up the move, I mean,
01:38 UNH has been sort of an outlier in that group. And maybe something like Johnson and Johnson and Merck
01:45 and Abbott get the memo. Again, I might be sounding a little Pollyanna, but I am looking at a buy the
01:52 dip. I'm not veering from that at all, but you've got to be so much more selective. I'm not saying
01:57 every index is a buy the dip. I mean, obviously we're going to see what happens to the Dow
02:03 this morning with Boeing. But overall, yes, I want to buy the dip because the one thing that
02:08 window undressing can't undo is the expectation that we have that the Federal Reserve is going
02:15 to be pretty active come March. Yeah. And of course we have a CPI
02:20 coming this Thursday, which should give us a little bit more insight if the Fed is able to
02:25 end up cutting at some point in the first quarter of 2024. I mean, Raghi, do you have any thoughts
02:30 just in terms of the inflation reading? Do you expect this to continue to fall or are you worried
02:37 that we might start seeing inflation pick back up again? We haven't seen signs of it in all the
02:42 little outlier data points. And I don't think even, it's got to be a really hot number for the Fed to
02:49 back off what that track is. Last time I looked at the Fed fund futures, March expectations are a
02:55 little bit lower for the rate cut, but it's still the most probable. Same thing with May, same thing
03:00 with June. So I'm still looking for that first rate cut no matter what in either March or May.
03:05 It doesn't matter if it's a delay. Obviously we'll see a little bit more chop and pull back
03:10 because so much of the rally was geared towards what was just probably bonkers expectation for a
03:17 quarter point, quarter point, quarter point cut in March, May, June. But even if it's a little bit
03:24 less dovish, I'm still looking for the rally to overlook a lot of the things that admittedly
03:30 don't look good because look, Gang, I mean, I know you guys have both traded these environments.
03:35 For those of you that have never traded an accommodative pivot from the Federal Reserve,
03:40 it's hard not to be a bull. I can't be a bear here. Yeah. And you talked about selective buying
03:46 here. I want to throw it at you here. Give us some names here, Raghi. What are you looking at
03:51 on the pullback here? Because if you think we're going to, you know, the Fed's going to be
03:55 accommodative, it probably means higher stock prices. Where are you looking? So in tech, I heard
04:00 you all talking about tech earlier. I wanted to get into Amazon, Meta and Microsoft. Those are my
04:06 favorites. TikTok had a moment where it sort of knocked the legs out from underneath Amazon with
04:12 that possible foray into e-commerce, but I still like Amazon for the long side, but Meta, Microsoft,
04:17 Amazon for the tech side. I mean, talking about financials, you think about the uptrends that
04:23 have been in JP Morgan, Visa, MasterCard, Bank of America, Wells. I know I'm going really fast,
04:28 but those are, it's hard not to like something in the top 10, 11 names within the XLF. The only
04:36 chop I believe we've seen is from Berkshire, you know, in terms of high concentration weighting.
04:40 So it's hard not to want to love to buy some dips in XLF, which might just be a better way than
04:47 trying to pick a boat, just play the tide in the XLF. I'm not super optimistic across the board
04:55 in healthcare yet, but basic materials have gotten on my radar. Basic materials, XLB, Freeport,
05:01 Mac, Moran. I'd love to see copper futures continue to move higher. Metals and mining are starting to
05:06 get on my radar. What about Alcoa? There's a forgotten one and it's really had a rough couple
05:11 of years, $90 back in 2022. It got down to 23 bucks just a few months ago. It's up here at 32.
05:18 Is this one you'd look at or is this just not? You know, what's interesting about Alcoa is that
05:22 downtrend that was just relentless through last year. We finally, at the very end of December,
05:28 popped up through two really important levels. Got above 30 and it got above the 200 exponential.
05:34 It's hard to hate a stock north of that 200. Is it going to gain some traction? It's really
05:39 too soon to tell, but if we dip back down to 30, I wouldn't mind putting on a smaller position to
05:44 see if we can regain some traction north of 33. Going back to financials real quick,
05:50 Raghi, I mean, you mentioned some of the bigger names. What about KRE or some of the regional
05:55 banks? I mean, we saw, of course, a lot of the turbulence in this space has been from the higher
06:02 interest rates. Do you think if we do end up getting these cuts in March or May that you expect
06:06 that the regional banks could be winners from that? KRE and IWM, Russell Futures,
06:13 they definitely put on a show at the end of last year that frankly, I was hoping but not expecting.
06:18 I thought if we're going to see some tax loss harvesting, if we're going to see some weakness
06:22 get weaker, that was exactly where I was thinking and it just defied gravity. KRE got above the 200
06:28 back in October, I believe it was, got above 45. It's an uptrend. The only thing that's looming
06:34 is last year's sort of opening. If I'm looking at whether stock is up or down on the year,
06:40 it's got to get above 60 to probably get some real attention. But north of 50 here,
06:46 it's hard to hate on it and you're so right. With that macroeconomic inevitability of some rate cuts
06:52 coming, maybe not as many as we think or hope, but with those rate cuts coming, it's hard to hate on
06:56 KRE and then therefore, hard to hate on the Russell Futures, the Russell 2000.
07:00 Lewis Author There you go. And then let's go back to the
07:03 material space real quick. You mentioned copper. Are there any other specific commodities that
07:10 you've been looking at and why copper? Kim Walsh
07:13 So copper is an interesting one. While gold and silver get a lot of the attention, if I'm really
07:17 looking at the economic optimism that tends to come with an accommodative monetary policy,
07:23 it's not just the US Central Bank. We're starting to see pivots from Lagarde and the European
07:28 Central Bank. So if we're slowly starting to see the FOMC, the ECB start to slowly move towards
07:36 rate cuts, hard not to look at the two canaries in a coal mine, which should benefit from this.
07:42 Crude oil, which is still iffy, but definitely copper. Copper got above 3.8 on the futures
07:48 contract, which is also above its 200. And so I'm watching XME, I'm watching even SLX, the steel ETF.
07:55 Freeport-McMoran is a great proxy for copper if you don't play copper futures.
08:00 Lewis Author Which ticker was that, Raghi? Sorry.
08:03 Raghi Sarkar Sorry?
08:04 Lewis Author Which ticker was that, the copper one?
08:05 Raghi Sarkar FCX, Freeport-McMoran.
08:07 Lewis Author FCX.
08:08 Raghi Sarkar Yeah, I'm way too caffeinated this morning,
08:10 guys. Sorry.
08:10 Lewis Author Oh, you're good. Yeah, that's where you hear
08:13 the Dr. Copper thing a lot, where people say you can look at copper as a gauge for the overall
08:17 economy because it's used in so many things from construction to technology. And now even a lot of
08:23 copper is going into the manufacturing of EV batteries. So I've been looking at a lot of
08:28 copper names myself. And again, you can kind of just look at copper's chart and when the economic
08:33 outlook is good, it's typically going up. And when the economic outlook is bad, it's typically
08:37 going down. So a lot of people use that copper as kind of a gauge for the overall economy.
08:41 Raghi Sarkar Staying above 3.8, that's what I'm looking
08:44 for in the front month of copper. And we still have maintained that even though right now we're
08:49 pulling back to it. So there might be an opportunity to jump into a little bit of copper here. But
08:53 I think getting above 4, again, it's just a matter of climbing the rungs of the ladder.
08:58 But if we can find some support here this week, that should bode really well. And to your point,
09:02 that CPI, if it's flat or even cool, here come those more aggressive break cut expectations.
09:09 Hard not to keep an eye on copper and maybe even crude this week.
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