The Fuse
Equity futures are very slightly lower this morning as we look forward to trading the last day of the month and quarter. Friday is a holiday and markets are closed, Monday starts a new month/quarter. For March the SPX 500, at a new closing high is up 3% and up 10% so far in 2024.
Interest Rates are down marginally as we could see a bit of whipsaw movement on the short end of the curve today at quarter end. Fed Governor Chris Waller last night poked holes in the theory of aggressive rate cuts, posturing the committee should proceed with even more caution. He cited concern for recent high inflationary numbers in the CPI and PPI, which were all but ignored by Chair Powell in last week’s press conference. Waller indicated the committee is in ‘NO RUSH’ to cut, preferring to wait for a few good inflation reports to trickle in. The economy continues to move at a nice pace.
Wednesday’s sharp rally in the last hour did little to spur buying overseas. European stocks were mostly flat, crude oil gained some ground as WTIC is now above 82 per barrel and gold keeps moving higher, above 2,230 per ounce. Japan’s Nikkei fell by 1.5% overnight but Chinese markets were nicely higher. A big skew towards new 52 week highs yesterday is set to propel the stock market higher as we get ready for the start of earnings season.
Earnings are few and far between this week, but we’ll hear from RH, CCL and CTAS on Wednesday. GameStop had horrible results and guidance, the stock is getting slammed today.
A massive run for stocks at the end of the day put the SPX 500 on track for a new CLOSING high yesterday. From the start it sure did not seem that way, in fact it appeared things might have unfolded as they did earlier this week – a pop and then big fade. But the bulls had something else in mind, maybe it was the window dressing we often see end of month or perhaps the rotation that has been prevalent continued. Whatever the case, new highs are uber bullish.
Stocks were weak and reflecting that much in poor breadth early in the week, but yesterday was a turnaround story. Very strong breadth all session long and finally the price action met the expectations. Russell 2K really led the way higher with solid breadth, the oscillators turned positive, so we’ll have to see if there is some followthrough or if this is simply a fakeout once more.
A new closing high for the SPX 500 is being celebrated all over the world (kidding!). The Industrials are very close to a new high and the 40K marker, while the Nasdaq is the laggard. Russell 2K has been strong and showing leadership, closing at its highest level since early 2022. New all time highs in the IWM are now about 10% away now. If that bell rings the markets would likely be significantly higher.
Good turnover on Wednesday as the trading was brisk, especially over the last hour or so. It was all buy programs as the indices knifed right through tough resistance levels. That is important, remember price and volume are what it’s all about. Expect to see heavy volume later today as this big expiration period takes place.
The Internals
What’s it mean?
As bad as it was end of day Tuesday, the flip side happened for the bulls on Wednesday with an avalanche of buy programs. That was pretty evident in the ticks, which were super green all session long, especially on the Nasdaq. The VOLD went right up the flagpole to finish very strong, highs of the day. We saw the TRIN rise up yesterday and push right back down, the VIX also lower on the day near the lows of the session. It was a trend up day (ADSPD), nothing makes the bulls more proud.
The Dynamite
Economic Data:
- Thursday:Jobless Claims, 3rd Estimate GDP Q4/2023, Michigan Sentiment, Pending Home sales
- Friday:PCE price index for February, income and spending
Earnings this week:
- Thursday: WBA, SMTC
- Friday:
Fed Watch:
The Fed meeting last week came and went, equity buyers were eager to add more stocks if the committee and the Chairman simply lowered the bar. That was the case, though the statement was identical to January’s print. The market is finally coming around to the Fed’s thinking of 2-3 rate cuts in 2024. It’s been a painful push back but frankly a market in alignment with Fed policy is needed. Wednesday we heard Chris Waller through some hawkish shade at the markets.
Stocks to Watch
Volatility – With a short week coming up and end of the month window dressing likely, we’ll watch for the VIX to take another dip lower.
Semiconductors – It was a big week for NVIDIA and their shareholders/conference, but news Monday from China about not using AMD or INTC chips any longer may counter some of the big positives of late.
Boeing – The company announced a big shakeup Monday with replacing the CEO by end of year. This may eventually help the company and stock, which has been performing badly this year.
