The Fuse
Equity futures have a spring in its step this morning, the last trading day of October monthly options. Given the strong bullish move this month this could be a big finish for the week.
Interest Rates are modestly higher this morning as bond traders remain steady ahead of next week’s bigger economic data. The 2 year remains below 4%, as that level is key for equity markets. Fed futures still see two rate cuts into the end of 2024.
Chinese central bank support helped goose stocks in that region, the Hong Kong market up 3.4% while Shanghai was higher by 2.9%.
Japan was up modestly. Gold is trading well above 2,700 per ounce, a new record high while crude is backing away from $70. Stoxx in Europe were flat, the dollar fell slightly (first loss in several days) the German bund up 1bp.
Earnings from Netflix were outstanding and with raised guidance this stock is up nearly 7% this morning. Also, ISRG posted strong results last night. Today we got a beat from PG and AXP, both Dow Industrial components.
Nice gains yesterday but not closing at the highs could be a concern. If markets continue to stay up today that could negate the worries. Stocks dealt with a headwind yesterday, being higher rates. Thus, the small caps underperformed and that affected breadth, which finished negative. That is not a dealbreaker though, that indicator is still on a buy signal.
Breadth was poor yesterday but that was the first time in several days. We have seen good breadth numbers of late so one day does not make a trend. The culprit was weakness in small caps, which was hit by higher rates across the board. There is a strong connection here between rates and small caps, keep an eye on this.
Volume trends remain positive, yesterday was an accumulation day for the indices. This means big institutions were in there buying, a good sign for the bulls. Turnover this time of year tends to heat up. Today should see a pretty heavy print end of day as options expire for the month of October.
Stocks pressing higher as the Industrials tagged a new all time high. We also say Wednesday the Transports hitting new 52 week highs, which triggered a ‘Dow Theory’ signal. Support remains at the 10 and 20 day moving averages. Russell 2K remains challenged, it could not confirm yesterday but we have another chance today. Dip buyers remain active.
The Internals
What’s it mean?
Internals were pretty weak all day long, the VOLD and ADD down sharply, but the VIX also was lower. Ticks were mostly red, TRIN rose up and then fell a bit (not too concerning). Meanwhile, put/call rose up sharply. If there are a few more days of this it would be a concern.
The Dynamite
Economic Data:
- Friday:housing starts, building permits, fedspeak
Earnings this week:
- Friday:CMA, SLB, AXP, PG, RF, ALLY
Fed Watch:
More Fedspeak this week but not as much as last, when we had 15 speakers in total! Whew! The inflation reports last week were mixed but they still see the fed cutting at least once and likely twice before the end of the year. Last week’s release of the Fed minutes pretty much told the story there, rates have backed up to be more aligned with fed talk.
Stocks/Issues to Watch
Retail sales – With a huge jump in retail spending over the summer will this be cooling down before the holidays?
Earnings – Later in the week some big names will report earnings, and this will likely be a market moving event.
One thing to remember, you don’t want to be too short during earnings season.
Boeing – Not that it matters much, but Friday after the close the company snuck in their earnings results early, a huge loss and 17K jobs being cut. Who does this on a Friday night, like a massacre? The stock may be hit hard.
