The Fuse
Equity futures are languishing this morning, having hit a level above 5,900 but now straddling this point. Following a medium-sized expiration week there is often a modest hangover effect. Dow Industrials are starting off slowly while Nasdaq futures have a nice bid, thanks to a continued run in Tesla.
Interest Rates are on the rise and may work to cap some gains in the equity markets as it did last week. The 10 year yield tagged 4.5% on Friday and backed away, but it is back up again with speculation the Fed is going to really slow down their pace. It is quite possible no cut in December and only 2-3 in 2025.
We believe the Fed won’t be done cutting until 2026.
After getting pounded Friday stocks are trying to regains some footing. Europe was mostly flat as was the dollar, gold is ripping higher, up by 1% as crude oil is trying to find a bottom just below $70. German 10 yr bund yields climbed a bit, the 10 yr yield held steady, Stocks in Asia were mixed with Japan down 1.1%, Hong Kong up nearly 1% but Shanghai lower by .2%.
A big earnings calendar this week with Walmart, Lowes and Target leading the retail hit parade. We’ll also hear from Baidu, Intuit, TJX, and WIX. Oh yes, and some little company named NVIDIA out on Wednesday after the close.
Friday was a big options expiration but it came and went without much fanfare. Stocks did fall sharply all session long, there was no bid to be found as bond yields rose again. The bond market is telling the Fed to slow their roll on rate cuts, that is the message delivered from Chair Powell last Thursday, too.
As you may recall, the market showed wild disappointment in April when the Fed said the same.
Breadth was bad again after a week of poor readings. That tells us more distribution is happening under the surface, we are just not seeing it yet. Oscillators though are approaching oversold and there could be a good bounce coming soon, but we won’t get excited about unless it is confirmed to the upside. The indices are at or approaching support, we’ll see if it holds or not.
Volume was elevated as one should expect on expiration Friday. Turnover was brisk towards the end of the day but also at the start of the session as sellers took control. There is not much else to say but Friday was a big day of distribution, large institutions selling stocks hard. We have had a few of those this month but overall has not been too damaging, but a cluster of distribution will certainly be considered bearish.
Support levels were tested on Friday, as we had been expecting to happen at some point. The SPX 500 made a beeline to the 20 ma and bounced, but nothing inspirational. The other indices did not travel down to that objective on Friday but that could happen soon. The SPX 500 held firm at 5870, the area of the most recent breakout. The 50 ma comes in at 5772 if the market continues its path lower.
The Internals
What’s it mean?
The internals bled once again, those ticks in Nasdaq tell the story. The QQQ was down better than 2% on the day, with higher rates the IWM also was weak, which is where breadth comes in. The VOLD was weak again, it has been for better than a week, the ADD also poor performance. Put/calls were on the rise again, the VIX shot up but finished off its highs of the day..
The Dynamite
Economic Data:
- Monday:Home Builder Confidence Index, Austan Goolsbee remarks
- Tuesday:Housing starts, building permits
- Wednesday:n/a
- Thursday:Jobless claims, philly fed, existing home sales, fedspeak
- Friday:SPX services flash PMI, flash manufacturing PMI, consumer sentiment
Earnings this week:
- Monday:TRIP, BTBT, BRC, NRXP
- Tuesday:WMT, LOW, XEV, MDT, VIK, POWL, KEYS, LZB, DLB
- Wednesday:NIO, TGT, ZIM, TJX, WIX, DY, WSM, NVDA, SNOW, PANW, JACK, CCH, CG
- Thursday:BIDU, BJ, DE, WMG, SCVL, INTU, ESTC, GAP, ROST, NTAP, CPRT
- Friday:GB
Fed Watch:
If last week’s subdued response by Chair Powell about future rate cuts did not sway you, then I’m sure the move in Fed Funds Futures probably did. The excitement over rate cuts has quieted down a bit from a month ago. The futures market may now only be pricing in 2-3 cuts in 2025, and only a 62% chance for a cut in December. That number is getting smaller, and if there is some good strength in the November jobs report that may end up going to zero. Powell certainly delivered a message.
Stocks to Watch
Name – event, level, your expectation
Name – event, level, your expectation
Name – event, level, your expectation
