The Fuse
Equity futures are mixed this morning with the Industrials slightly lower but strength in the Nasdaq, SPX 500 and suddenly resurgent Russell 2K. That index is now about 5% away from an all-time high, lower rates are a nice tail wind to small cap names. The Russell is big enough to carry the rest of the market higher, we have seen this since late last week.
Interest Rates are rising again on the long end of the curve but short term rates are coming down, serving to flatten the curve a bit. The 2 year has fallen below 4.5% now with the spread between 2/10’s at low levels, not seen since January. Fed futures are now pricing in nearly 100% chance of three rate cuts in 2024, ahead of the Fed.
Former President Trump named a VP running mate. Gold is up strong this am but crude oil is getting hit hard, down about 1.5%. WTIC is approaching $80 per barrel now. In Europe the Stoxx 600 fell .6%, the dollar climbed .1%. Natural gas in Europe was higher, German 10 yr bunds down 2bps. In Asia Japan and Shanghai were slightly higher, Hong Kong down 1.5%.
Very strong earnings this morning from Bank of America across the board, United Health reported higher medical costs and is down slightly, PNC reported in-line earnings. Morgan Stanley and Schwab will be out later.
Stocks were strong out of the chute Monday and quickly made their highs in the first two hours but then drifted lower. A late day rally after filling the opening gap put the SPX 500 just below another new record close. The Industrials managed to make it to a new high, and with the Russell small caps continuing surge it may not be too much longer for that index, which is about 6% off new all-time highs.
A third straight day of positive breadth but a bit disappointing. No doubt profit-taking entered into the situation, especially in small cap and Nasdaq names. New highs are still on the rise, oscillators are extremely overbought but that condition could last a bit longer. Internals were not extremely positive even with the rally to the midpoint of the day, something to be concerned about.
Volume trends have been bullish, robust turnover as stock prices explode. That is what you like to see when a rally gets started, heavy volume which may equate to short-covering and then follow-on buying. We are seeing better statistics with strong volume prints across the board, but with the overbought condition the market is vulnerable.
This market just does not want to pull back as buyers keep coming after stocks. That has been the pattern recently, and frankly there are several levels below current prices that will support a pullback. We won’t try and call the move down but suffice to say it could happen anytime. SPX 500 has support at 5500, then 5450, and 5475.
The Internals
What’s it mean?
More positive internals but not overwhelming as the last couple of sessions. That means the market buyers may be running out of fuel or simply getting tired. But, after some good sessions even the market is due for a rest. VOLD was barely up and the ADD also showd weakness. Ticks were mostly green but spread out and nearly even, VIX shot up end of day while put/call remains stable. Not much to read into this session.
The Dynamite
Economic Data:
- Monday:N/A
- Tuesday:Retail sales, import/export prices, business inventories, NAHB housing market index
- Wednesday:Mortgage Apps, Housing starts, Industrial production/cap utilization, Fed Beige Book
- Thursday:Jobless claims, leading indicators
- Friday:Japan Inflation rate (June)
Earnings this week:
- Monday:GS, BLK
- Tuesday:BAC, MS, PNCE, UNH, IBKR, JBHT
- Wednesday:ASML, ALLY, JNJ, SYF, EQX, AA, DFS, CCI, UAL, STLD, ELV, AA
- Thursday:CTAS, INFY, NOK, KEY, TSM, NFLX, ISRG, PPG, AAR
- Friday:AXP, SLB, TRV, HAL
Fed Watch:
A pretty nice job by Chair Powell last week on the Hill. In double testimony he re-affirmed the committee’s need to watch the data and hinted the next move would likely be a cut rather than a raise. Higher for longer was not heard much, meaning they intend to cut rates at some point this year. Other fed speakers reiterated the same position. Chair Powell speaks on Monday, two other fed speakers are out later in the week.
Stocks/Issues to Watch This Week
Retail – Sales for June are out Tuesday morning and I will be looking for some strength following a couple of poor readings from the Spring.
Amazon – Kicking off prime days this week (Tue/Wed) this is a very popular event where shoppers go crazy for bargains. This has become a huge staple for Amazon’s earnings.
Tesla – After an explosive month the stock had virtually recovered all of its 2024 losses by Wednesday. This is a high momentum name that will definitely move markets. Any news about this car is going to bring out the traders in spades, with expiration on Friday it could get interesting.
