The Fuse
Equity futures are down but have rebounded sharply from a deep drop overnight. At one point the ES futures were down 80 handles after word spread of an attack by Israel on Iran over the air. That sent futures spiraling lower, the futures tagged 4,963 but moved back up over the last few hours.
Interest Rates are lower this morning as bond buyers come back to fixed income. Perhaps rates have risen a bit too much and yields have become attractive again. Fed futures now implying less than 2 rate cuts in 2024, but some Fed speakers out this week are saying no more than 1 and quite possibly NO cuts in 2024.
Can the stock market move forward with rates at 5.25%?
Volatility is certainly here. Equity futures, oil, gold and overseas markets were spinning these last few hours after an air attack on Iran by Israel. We have seen much lighter activity in the markets this week, in fact many days this month have seen opening up moves totally wiped out. That has been the case for the last few sessions. In Europe the stoxx was down .6%, oil is now red as is gold, perhaps understanding the situation creates more certainty as buyers step in.
Earnings from AXP and PG this morning (two Dow components) were strong but after a nice runup into the print these stocks are pulling back. SLB also printed a nice quarter with a beat on the top/bottom line. Last night Netflix beat but is getting hit hard in the pre-market while Intuitive Surgical is rising by 3% after a nice beat and price target raises.
The stock market is showing no signs of letting up, that is to the downside. Once again, another reversal intraday had the complacent bulls looking for answers. It’s been a terrible month so far and with only eight sessions remaining the bulls have some catching up to do. With 14 trading days completed in April 11 of them have been down (SPX, Nasdaq). Those are poor statistics by any stretch, but there is some time left to correct it.
Negative breadth again, we seem to be singing the same ol’ tune everyday. We started off strong but then struggled to hold, sellers took control and pushed the markets lower. Oscillators actually turned up due to the oversold nature of this indicator, but new lows expanded again over new highs, this indicator is now bearish.
More strong turnover that ended up flipping midday as we saw Wednesday. The catalyst was likely more hawkish talk by some Fed speakers, but regardless this market is barely able to hold onto gains. At some point the floor will be in, but it is not right here and now. Higher volume selling signals big institutions are distributing stocks, and that will lead to lower prices.
Today saw the 5K level tested and it held, for what it’s worth. That is a symbolic level, there is a gap to fill at 4,980 then the 100 day moving average looms at 4,930. It’s been an odd couple of sessions with the markets so oversold, stocks should be bouncing and holding but there is very little conviction.
The Internals
What’s it mean?
Plenty of stress on the markets right now and it is seen quite clearly in the internals. VOLD is just not climbing as it did before, and remains in poor shape. Volatility is lower than it was when it spiked this week but it remains in an uptrend and could make a move above 20% soon. Ticks are still red and expanding, we see sell programs hit all day, reminding us more selling is coming to the for. New lows are expanding as well, but the bulls still believe this is the time to be a buyer.
The Dynamite
Economic Data:
- Friday:n/a
Earnings this week:
- Friday:AXP, PG, SLB
Fed Watch:
Several fed speakers out this week, Chair Powell on Tuesday. So far, the data is as such where the FOMC is going to hold rates higher for longer. Atlanta Fed’s Bostic and Minneapolis’ Kashkari sank the markets this week with talk of no cuts coming in 2024 (their view).
Stocks to Watch
Retail Sales – This will be an important report Monday morning. Is the consumer starting to fade some? March was supposedly a strong retail month but if it is the peak, the market may respond negatively.
Industrials – While the Dow only has a handful of names reporting, the industrial complex has many names delivering earnings this week. The Industrials and Transports are in correction territory, we’ll see how much of a bounce they receive.
Apple – We’ll keep one eye on Apple, which stunned the markets on Thursday with an announcement about new PC’s coming with AI capability. That led to the strongest move for the stock in over a year. We’ll see if there is followthrough.
