The Fuse
Equity futures are backing off a bit this morning after a strong start to the week. There is no doubt the bulls have taken control of the wheel again but after 4-5 up sessions the market is due for a breather.
Interest Rates are moderately higher this morning as bonds are selling down. A recent rally in fixed income may have stalled as the 10 year yield approached 4.4%. That may be the low for this cycle and rates may turn back up slightly, the top likely around 4.65%.
The Biden Administration has revoked some semiconductor licenses to Huawei and that is going to have a negative effect around this group. Yesterday Minneapolis Fed chief Kashkari said the Fed could not rule out a hike as the next move, most investment banks believe a cut is next and likely by September. Sweden overnight cut its lending rate by 1/4 point. The US dollar is firm, gold is up slight while crude is down about 1.5% after inventories were shown to have risen. European markets were mostly higher while Asian markets were lower.
Earnings out this morning are not looking great, with Shopify and Uber down sharply following a miss or simply meeting expectations, Affirm did much better. Last night a beat by Lyft and Toast have pushed those stocks higher, Wynn beat and guided up as
did Arista Networks
A strong followthrough day yesterday would have been ideal but the buyers seemed to run out of energy. That’s fine, the indices finished in the green but well off their highs. Strength was seen in small caps once again as buyers responded to lower interest rates. If that continues to be the case we will see small caps lead the market higher.
Breadth was barely positive, something to be a bit concerned about. An overbought condition can correct at anytime of course, and without notice. Pullbacks are fine if shallow and/or narrow, but so many strong breadth days in a row cannot keep up for too much longer. Oscillators are very overbought here, news highs continue to expand.
Volume has been coming in a bit, no question bulls are worried they have missed the bulk of the rally. The last week or so had seen strong turnover, from the post-Fed rally until Monday’s very powerful followthrough day. If buyers are just not stepping up at these levels we might see a bit of backing n’ filling, a normal pullback to let big money into the game.
Rising above the 5,180 level was huge for the SPX 500. One more day up and that will be cemented as strong support for now, the next likely target will be the all time highs above 5,264. That is about 1.5% higher than current levels. Nasdaq was weak most of the day as stocks there were mixed, but we continue to see strong moves from the small caps, IWM is making a run at $210 one more time, and if it sticks the old highs above $220 would be next.
What’s it mean?
Though markets were on the positive side of the ledger the internals were much more subdued today, that is versus the last few sessions. Tired market? Could be, as the oversold condition from last week ignited some heavy buying, but that may be over. VOLD was quite low and the ADD dived all session long. Notice the ticks were fairly strong on both sides, concentrated red and green but mostly red towards thge .
The Dynamite
Economic Data:
- Wednesday:Wholesale inventories, crude inventories
- Thursday:jobless claims
- Friday:Michigan Sentiment
Earnings this week:
- Wednesday:AFRM, EMR, KMT, RDWR, ABNB, CAKE, TTD
- Thursday:CEVA, GDRX, PZZA, RBLX, TPR, AKAM, AMN, DBX, RXT, SYNA, TREX
- Friday:ROAD, DOCN
Fed Watch:
Following a quiet period where speakers were silenced before the Fed meeting, we’ll have several unleashed on the public this week. No less than 10 speakers talking about the economy, inflation and monetary policy. Before last week’s meeting these speeches were watched carefully for any hint of policy shifts, and that pushed the markets around as volatility rose. Look for more of that this coming week.
Stocks to Watch
Apple – Following last week’s big earnings beat, buyback and rise up Friday the company has an event this week (Tuesday), likely about iPads but then we could hear about AI again and other new tools, maybe even a new iPhone coming out later in the year.
Disney – Last quarter this company finally delivered on the top/bottom line. They report again this week and we should see continued improvement in their earnings, revenue from parks and entertainment.
Gold – The metal has suffered a downturn and is now trading below $2,300 per ounce. If inflation is truly coming down then we’ll see gold moving lower, perhaps this recent 7% drop is telling us that already.
