The Fuse
Equity futures are rallying modestly in the early going, trying to build upon Tuesday’s very strong move higher. The SPX 500 finished at a new all time record, the Industrials and Nasdaq are right up against it and may push through later in the week.
Interest Rates are holding steady as bond traders await the PPI for February and retail sales to come out on Thursday morning. These readings will move markets significantly. Fed futures see a 68% chance of a rate cut by June and a full percentage point (4 rate cuts) by year end, which is still much higher than the Fed’s expectations. Next week’s meeting will have new projections on inflation, GDP, employment and fed funds.
Bank of America’s strategist raised their earnings estimate for the SPX 500 by a fairly significant level, meaning the multiple expansion of the market is going to continue. That may keep a bid under the market. The jobs market is strong and healthy, though Wall Street economists now expect the US economy to grow at 1.8% during the first quarter, up from .6% in January. The Atlanta Fed sees much stronger growth, 2.5% for Q1 2024. Second quarter estimates were revised up by analysts to 1.5%.
Earnings are quiet early in the week but later today we’ll hear from homebuilder Lennar, tomorrow am some retail names like Dick’s, GIII, Dollar General along with Canadian Solar.
Terrific day for the bulls, though the statistics were not all that impressive. However, the price action was very strong with the SPX 500 making a new closing high, the Dow Industrials chart looks primed and ready to move there as well as the Nasdaq. After two poorly-traded sessions the bulls may be ready to take the markets higher. CPI was hot but it did not matter, the markets were well bid from the start of trading.
Breadth was positive Tuesday as that is really the only good thing we could say about it. The skew was not all that impressive but the rotation was on. New highs continue to impress, this indicator is on a buy signal. The oscillators are split here with the NYSE in positive territory, but that may change soon.
Stronger turnover on the indices than the prior session means a strong accumulation day. That was the case Tuesday as sellers completed their work Monday, letting the buyers step in to pick up stocks at a bargain price. The high volume selling days have not been all that good and really tend to freak everyone out, but they are all short-lived, we just have to deal with them and live to fight another day.
New highs for the spx 500 (closing), now we see how the market does at 5,200. With a followthrough day we can confirm the new high, but that requires a strong day up today or tomorrow at least. Nasdaq is right near a high as is the Industrials, which looks ready to make a run at 40K.
The Internals
What’s it mean?
Pretty good internals but not lights out. We see good strength in the ADD and VOLD but not before these internals started lower. The VIX declined sharply while TICKS were green, representing big buy programs were happening. Put/calls rose again, which could be a concern. All in all, not a bad session for the markets to make a huge comeback from the depths.
The Dynamite
Economic Data:
- Wednesday:Mortgage Applications
- Thursday:Jobless claims, PPI, retail sales, business inventories
- Friday:Import/export prices, industrial production, Michigan sentiment surveys
Earnings this week:
- Wednesday:DLTR, LEN, S
- Thursday:DKS, DG, ADBE, ULTA
- Friday:BKE, JBL
Fed Watch:
No Fed speakers this coming week as the committee prepares for the next meeting in just over a week. This past week had Chair Powell testifying in front of Congress twice and he reiterated the committee’s pleasure with falling inflation, strength in the economy and the labor market. However, the FOMC is going to be very careful and slow when it comes to rate cuts, which the Chairman said will happen at some point.
Stocks to Watch
Super Micro – The high charged semiconductor name will officially be a member of the SPX 500 after the close Monday. It may be a sell the news event.
Apple – The biggest company in the world has been struggling of late but did manage to post a gain Friday.
The chart is challenged here but when the expectations are so bad is when the stock starts performing well. Contrarians know the name well!
Inflation – February readings from CPI and PPI will be out this week. Recall last month’s numbers were pretty hot but that did not stop the stock market from reaching new highs. However, we are in a seasonally weak period and another hot reading might derail the rally.
