The Fuse
Equity futures are higher this morning, trying to followthrough on yesterday’s blistering session. Following the Fed’s policy decision markets took off the upside and never looked back. It was a risk on day for most of the session and that meant short covering and no selling. New highs for three of the indices, we’ll see if that continues on.
Interest Rates are lower again across the curve, the short end starting to bend lower. Bond holders embraced the Fedspeak yesterday as they now believe the Fed will eventually cut rates, the timing is in question. Projections stick by 2-3 rate cuts in 2024, three more in 2025 and three more in 2026.
Stocks hit all time highs (save for the Russell 2K) on Wednesday on robust volume and strong statistics (see more on that below). European stocks followed the US markets higher as well, pushing up nearly 1%. The German Bund yield dropped 2 bps to 2.41%, the same drop in 10 yr yields in the US. Asian markets were mixed, Hong Kong rising a strong 1.9% and Japan up 2%, Shanghai mostly flat. Gold is ripping higher this morning, more than 2% to a new all time high, crude is slightly lower.
Earnings from Micron last night were lights out! The company ripped higher after the close as they beat estimates handily and guided up for the remainder of 2024. KBH had a strong report as well, but not so good for FIVE and CHWY.
Markets were walking it up slowly yesterday waiting with anticipation for the Fed’s second meeting of the year to conclude with some clarity. What we received was basically the same wording as the January meeting, and Chair Powell was in no mood to deliver hawkish news. He was guarded and concerned as usual, mostly from the recent disturbance from hot inflation numbers. Powell said we have probably reached peak levels for Fed Funds in this cycle, which was good news for the bulls.
As my good friend Tom McClellan likes to say, gobs of breadth are extremely bullish. That was the case all session long, with stocks pushing through old highs with brute force. The combination of all time highs with strong breadth is powerful and tells us the trend can continue a bit longer.
Very strong volume on the IWM and DIA unleashed a torrent of buying after the Fed statement was released. The Industrials tagged a new all time high, the Russell 2K is a bit shy of that level but only by about 17%. If rates move lower we’ll see that index catch up in a hurry, volume trends remain very bullish. We see more upside if volume trends remain bullish.
Fresh new highs in the Nasdaq, SPX 500 and Dow Industrials. A very impressive session, stocks tried to fail early on but buyers kept the pressure on. With 5,200 exceeded that level now serves as support, but a confirmation (another close above) would cinch it. We see the Nasdaq soon making a run to 20K and the Industrials are right on the cusp of 40K. Markets are not that oversold here.
What’s it mean?
Amazing day for the internals, with the VOLD finally making a big move, as did the ADD. We saw very strong ticks for both NYSE and Nasdaq, VIX fell sharply while TRIN also dropped hard (bullish). The internals finally aligned with the price action, and that means good news for the market going forward. Short week coming up (Friday markets are closed), and that may put more pressure on volatility.
The Dynamite
Economic Data:
- Thursday:jobsless claims, S&P global flash – March, leading indicators, home sales
- Friday:n/a
Earnings this week:
- Thursday:ACN, DRI, BZUN, SCVL, FDX, LULU, NKE
- Friday:N/A
Fed Watch:
The Fed is likely to pass on rate moves this week but we’ll be watching the projections (new) closely and what Chair Powell says in the press conference. The most recent inflation data is not inspiring confidence in the committee to drop rates soon.
Stocks to Watch
Inflation – Last week’s readings on inflation have established a pattern, and not something the Fed wanted to see. At this point, the committeed is likely to continue taking a pass on moving rates if inflation remains troublesome.
Federal Reserve – We’ll have a meeting this week and the market’s response is going to be watched carefully.
NVIDIA – Who else? The big chip company has an event this week and we’ll be watching what they say and how much influence they have over technology after a sharp selloff.
