The Fuse
Equity futures are rallying sharply this morning as a strong bid continues in the markets. Important economic data is due to be released this morning, Retail Sales for February and the Producer Price Index (PPI) as well as jobless claims for last week. January’s PPI number was rather hot, the CPI released this week was as well but market players shrugged it off.
Interest Rates are steady to slightly higher this am as the long end of the yield curve remains in a tight band between 4.4% and 4.1%. Next week’s Fed meeting will no doubt have some influence, Fed futures have now backed off but not quite enough for the Fed’s projected moves in 2024. Once in alignment the market will focus on earnings, growth and the correct stock market multiple vs those metrics.
Stocks in Europe were modestly higher overnight while Asian markets were mixed, Japan gaining ground but Hong Kong and Shanghai down slightly.
Gold futures are backing away some but crude is up about 1% as WTI futures are back above $80 per barrel. Tomorrow is a big expiration for March, a triple witching that might increase market volatility into early next week.
Last night Lennar put up some strong numbers and guidance, this morning Dick’s Sporting Goods also recorded a strong quarter and guided up nicely.
Robinhood is up after the company said trading volumes were up 41% in February over 2023.
<Let’s call it a day of consolidation. Following the big move up Tuesday there was no followthrough, the day range was narrow, which means price action was not much of a factor. With a few days remaining before the next Fed meeting it makes sense the market is starting to get nervous, more because the expectation for rate cuts and WHEN they will happen may not please traders. Nothing should be a surprise, however.
Positive breadth, barely with the NYSE coming in 16-11 on the good side. However, breadth was much better earlier in the day until the sellers started making some moves. Some late sell programs skewed the stats toward a breakeven, but there is a good chance to turn the markets up if there is a strong bid to close out the week.
Volume trends are weakening here, no surprise during this challenging month. We have seen strong volume trends early this year but when the buying power is empty this nothing you can do but wait. Perhaps some sideways action on lower turnover is what is in store for the coming weeks.
A pretty strong run by the indices this month though the mixture has been somewhat odd. Still, good support at the 5,100 level for the SPX 500 as the index tries to mount a rally above 5,200. The Nasdaq fell back some yesterday but 20K is straight ahead, the Industrials are looking at 40K on the horizon.
The Internals
What’s it mean?
Internals were actually much better than the action in the markets. Perhaps the ebbs and flows were indicative of the option expiration coming on Friday, a triple witching. VOLD was strong today but the ADD was off its highs, so there was good volume coming into the names that were rising. Ticks were red most of the session, put/calls remain elevated. VIX was lower on the day, continuing yesterday’s march down in the fear index. PPI is going to be a market-moving event today.
The Dynamite
Economic Data:
- Thursday:Jobless claims, PPI, retail sales, business inventories
- Friday:Import/export prices, industrial production, Michigan sentiment surveys
Earnings this week:
- 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.
