The Fuse
Equity futures are moderately lower this morning as markets continue to make adjustments to the current Fed policy and outlook. Four Fed speakers today including a speech by Fed chair Powell at noon.
Interest Rates are on the move again today, the 10 year reaching 4.4% overnight and backing off. Still, this latest rise was a big jolt to the bond market and a warning shot that inflation still has not gone away. Fed funds futures are starting to reduce expectations for a rate cut, the next two meetings may not be in play, but now looking at July.
Gold is rising again and has nearly reached $2,300 per ounce. The yellow metal is responding to geo-political concerns around the globe and a potential for no rate cuts in 2024. If the jobs number is strong coming up later this week we can probably forget about rate cuts for the foreseeable future. Oil remains well-bid as well for the same reasons as gold. Euro stocks were mixed while stocks in Asia fell in sympathy with US markets. A huge earthquake in Taiwan is reverberating in Asia.
Earnings are pretty light this week but Dave & Buster’s did put in a strong quarter with raised guidance (though they missed estimates).
Terrible action all day long. It started from the beginning of the day and while volatility did rise up, there is little movement all day long after the opening plunge. That is not too common but when volatility is suppressed as it is currently there is are not big ranges during real time hours (RTH). We’re stuck with this for awhile.
Breadth was awful again as this indicator is now on a sell signal. The recent bullish reading on the MC oscillator is now a distant memory, closer to a mild oversold than anything. Can the markets rebound following such poor two-day action? That has been the pattern since October, and until it breaks we respect the trend.
Volume picked up as we notched distribution days across the board. All indices had higher volume on the downside today. Notably, much of the volume hit early in the day on the huge gap down, once support was hit the sellers just stopped selling. Regardless, a poor session like this can certainly spread to more downside if the bulls are not careful. .
5,200 is holding on by a thread. The recent highs are in place for now, but some serious damage has been completed under the hood. The technicals are poor, support zones are being tested and there is much better support even lower than current levels. The Russell 2K did not lead to the upside this time around as it had a nasty move, losing nearly 2% on heavy turnover.
The Internals
What’s it mean?
Another rough day for the indices, quite notably with the red in the ticks. check out the TICK/Q, which had red all day long until some late buy programs hit. That is quite unusual. ADSPD remains down while the VOLD and ADD finished sharply lower. VIX gapped up a second straight session. Can the bulls turn it around to end the week positive? Plenty of time and work to do it.
The Dynamite
Economic Data:
- Wednesday:ADP Employment, ISM Services
- Thursday:Jobless Claims, Challenger Job Report
- Friday:March Employment Report, Consumer Credit
Earnings this week:
- Wednesday:LEVI
- Thursday:KRUS, LNN, LWW, RPM
- Friday:GBX
Fed Watch:
Chair Powell with some comments last week basically reiterated what he said the prior week, and that is the data will tell the committee how to proceed. To be sure, the PCE data released on Friday was in line and rather friendly, as it met the committee’s expectations. They are wanting to see more data though and that requires a couple more months. The higher rates on the short end have been working.
Stocks to Watch
Volatility – The VIX often pulls down in front of a long weekend and rebounds after traders return. We’ll see if that pattern holds.
Equity Futures – No response Friday following Chair Powell’s comments and the PCE inflation data, but we’ll see how it goes early in the week.
Apple – Remains an enigma, plenty of news around this name but we often see buyers come to the rescue in times of distress, like now. A big tell on the market.
