The Fuse
Equity futures are falling sharply this morning as traders are still trying to figure out if rates are going higher. The difficult part of trying to predict rates is they are constantly in motion, though the charts have been pretty unified, of the opinion rates are staying higher for longer.
Interest Rates pushed higher yesterday but the equity market did not flinch, preferring to take on some risk following Wednesday’s smashing. Rates are down a bit as bonds catch a bid, not often on a Friday but certainly with selloffs in tech and small caps there is a fear trade working.
Oil prices have rebounded to trade above $86 once again, while gold is also in new high territory above $2,400 per ounce. We also have silver moving higher as well. Yields are falling but volatility is on the rise as a larger risk off day seems to be setting up.
Earnings from some big banks early Friday have the markets on the move. JPM beat but offered some cautious guidance, Citi beat top/bottom as did Wells Fargo, these two are up modestly. Blackrock also beat with a strong quarter.
A nice turnaround Thursday after the release of mixed PPI data. The markets were pounded on Wednesday following the hot CPI number, which is reflecting the sentiment of some hawkish Fed members. We learned more about the path of rates, which are like to stay higher for longer, though we suspect maybe one cut is coming (or maybe two) if some economic weakness arrives. So far that is not the case.
Breadth was barely positive with the strong move higher, which tells us yesterday was mostly about short covering and not conviction buying. We did see a strong move up from Apple, which is creating new macbooks using AI inside. That was big news and helped improve breadth in tech names, but overall the spread was about even.
A big reversal yet again but lacking conviction with lower turnover statistics. That is worrisome, as it has been a few times already where we have seen strong moves up with lower volume. The market remains vulnerable if that pattern continues.
Somebody must really like that 5,200 level on the SPX 500. Six of seven days have seen the index close there, but with weakness starting up and a risk off day approaching that level may fall here. Nasdaq is still trying to hold 18K while we see 38K as better support for the Dow Industrials. If IWM fails to hold 200 though that could be a big problem for all the indices, indicating breadth will deteriorate even more.
The Internals
What’s it mean?
It’s hard to fault the bulls on such a strong day, but the internals really do not support the move that happened yesterday. Just look at the VOLD and ADD, barely above zero as the indices were up strong. That’s due to short covering, which pushed out those who layered into shorts on Wednesday. Ticks were pretty even, and put/calls came down modestly as did the VIX. Today is important to see the end of week internals.
The Dynamite
Economic Data:
- Friday:consumer sentiment, import/export prices
Earnings this week:
- Friday:JPM, BLK, WFC, C, SST
Fed Watch:
Lots of fed speakers last week and the main theme was – higher for EVEN longer! The data has been relatively strong and even some inflation is starting to creep in. That could be
Stocks to Watch
Inflation – Big inflation numbers coming this week with PPI and CPI. Last two months were pretty hot.
