The Fuse
Equity futures are flat this morning as low market volatility is starting to weigh in. The VIX at 12% is not inspiring anyone to buy stocks at these levels, but with a bit more movement we may see active traders stepping up.
Interest Rates are dipping a bit this morning as bond traders add to their holdings. The 2 yr fell modestly to about 4.84% while the 10 yr is down a bit as well. Fed futures market is factoring in no change at the next policy meeting in June, while the July meeting has a 76% probability of staying put. Fed speakers yesterday reiterated their posture of ‘higher for longer’.
Not much on the news front but Bitcoin is higher this morning. Oil is backing away from the $80 level while gold is down from its recent highs.
European and Asian markets were down overnight, Hang Seng down 2%. The US dollar is trading flat, many analysts predict the greenback’s upside remains limited, especially if the economy continues to cool down. NY Fed nowcasting has the Q2 GDP estimate under 2% currently.
Earnings from Lowes were a bit higher as they affirmed full year guidance. Macy’s is on tap today. Last evening a poor response to Palo Alto and Zoom as they both beat but provided cautious guidance. Tonight we have Toll Brothers and Viasat, tomorrow am Target, TJX, Analog Deviseds and others.
We can call it followthrough, but the market movement Monday was rather anemic. With an event from Microsoft touting their AI initiative and some refreshed products, technology took the lead. Of course, NVIDIA remains in the forefront as well, they will report earnings after the close tomorrow. If rates keep steadily moving downward we should see small caps and housing-related stocks starting to move.
Breadth was poor but is still on a buy signal. This indicator when max overbought as it was last Wednesday can survive a few mild or even down sessions. Oscillators remain elevated but did come down a bit on Monday. New highs remain strong, well over 200 prints on Monday. If that remains the case we should see this bull market run last a bit longer.
Turnover is starting to slow down, not too surprising in a pre-holiday week. Further, we just had pretty big volume on expiration Friday, that is normal behavior. We don’t expect to see overwhelming turnover but certainly the NVIDIA earnings is going to shake the trees a bit, moving several names up/down with heavy volume.
The SPX 500 barely closed above the 5,300 level again so we’ll mark that as short term resistance. If there is a weekly close above there that will firm up the support. Nasdaq remains interesting, with 20K in its sights. The Industrials were off sharply (thanks to JPM) but did finish off the lows of the session, but under 40K. We should see another move above that level within days.
The Internals
What’s it mean?
Another rather dull day and the internals really tell the story. The VOLD was atrocious all day long, the ADD started high and fell all day long, a signal that prices here are a bit elevated. Put/calls are on the rise again, notice the strong red arrows in the ticks. VIX had another beatdown though, and remains below 13%. This smacks of complacency and will eventually be paid back (with some big down sessions).
The Dynamite
Economic Data:
- Tuesday:N/A
- Wednesday:Fed meeting minutes, existing home sales
- Thursday:Chicago Fed National activity index, SPX global flash and PMI, New home sales
- Friday:Durable Goods, Michigan consumer sentiment final
Earnings this week:
- Tuesday:AZO, EXP, LOW, M, TOL, URBN
- Wednesday:ADI, DY, TGT, TJX, NVDA, SNOW, VFC, ELF, SNPS
- Thursday:BJ, RL, SCVL, DECK, DLTR, MDT, INTU, ROST, WDAY
- Friday:BIG, HIBB, BKE
Fed Watch:
With some better data of late one would think the Fed committee members would be willing to ease up a bit on the hawkish rhetoric. One would think…but it’s not happening. We have several fed speakers this week, nine early in the week. Last week Chair Powell pretty much reiterated what was said at the last meeting, but that was before the better than expected CPI.
Stocks to Watch
NVIDIA – The monster semiconductor company will release earnings after the close Wednesday as many are looking for some strong numbers and guidance. They have rarely disappointed the past few quarters, at some point they will not meet those lofty expectations.
VIX – Volatility is down in the dumpster once again, closing under 12%, which is a danger zone. Could it go lower? Of course, and with the holiday coming up that is a strong possibility.
Retail – With last week’s poor April retail report it’ll be interesting to see/hear what many companies say this week. Several names will report like Target, Lowes, TJX and Ross. Will they reiterate the consumer slowing down?
