The Fuse
Equity futures are weak to start the day after some geopolitical news (Ukraine/Russia) spilled over to US market and is causing some concern.
As expected, gold and silver are higher. Perhaps today is simply a ‘giveback’ of some Monday gains.
Interest Rates are falling quite a bit as the safety trade is in effect. Geopolitics is starting to enter the equation now, and that means a flock to bonds as yields start to head down again. The 10 yr once again nearly tagged 4.5% Monday and backed away, it seems bond buyers are satisfied with that level. Fed funds futures are now seeing about a 50/50 chance of a rate cut next month.
Stocks are under some pressure this morning even though some recent data like manufacturing and retail sales have been positive. In Europe the STOXX gained a small amount of ground, crude fell .4% while gold and silver are rallying sharply. The German 10 yr bund yield fell by 5bps, 10 yr fell 4bps, in Asia stocks were up, Japan higher by .5%, Hong Kong up .4% while Shanghai won the competition with a .7% gain.
Earnings from Walmart were terrific, the company guided up as well. Lowes came in with good numbers and raised their forecast for the coming year on storm recovery lift. Tonight we’ll hear from Keysight, tomorrow Target, TJX, WIX, and Williams Sonoma.
A pretty decent day all around for the Nasdaq and SPX 500, the industrials were down slightly but on lower turnover. Volume was lower across the board, but the price action was showing a bottom may be in place from last Friday. A few more sessions above those lows will confirm that condition. Retail names will be in the spotlight this week with some heavy names hitting, along with NVIDIA earnings out tomorrow evening.
Some better breadth but much like last week something is lacking. When markets are higher it just seems there is something in the way of stocks ripping higher. We had that day of course after the election, but since that avalanche of breadth (better than 5-1 advancers) the rallies seems suspect. Oscillators are still in negative territory, which is somewhat at odds with the market making new highs. Speaking of new highs, issues are dominating the new lows still, on a buy signal.
Turnover was notably lower yesterday, stocks finished stronger but against a monthly expiration the volume levels were far less. Perhaps we’ll see a bit more trading volume later in the week as we receive some important earnings reports (Walmart, Target, NVIDIA, Baidu, Deere). We are entering a period of lower volatility into the end of the year which also means volume levels will drop.
We can confirm now that Friday’s levels are cleared as good support. A day of higher lows is in place, another session like that today will cement the argument. Nasdaq was the strongest player of the day and continues to work around the 20 day moving average. The Industrials caught support at the gap from the election day rally, if that holds there are plenty of short sellers to get squeezed.
The Internals
What’s it mean?
Pretty good show by the internals on Monday with the VOLD finishing near the highs of the day, the VIX a bit lower while put/calls finally settled lower as well. Ticks were moderately pread across the board, more green to start the day while the sellers had the edge towards the end. ADD did not impress once again, there seems to be strange dynamic here with breadth and volume breadth, we’ll see if they get on the same page this week.
The Dynamite
Economic Data:
- 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:
- 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
NVIDIA – The big chip company reports earnings on Wednesday, it will no doubt be a market mover.
Tesla – Elon Musk’s company has ripped higher since the election and continues to move ahead, nearing new highs. The consensus is the election of Trump will be favorable to Elon and his EV company.
Interest Rates – Yields on the long end of the curve have been on the rise since the Fed’s first rate cut decision in September. 4.5% seems to be the level that traders are looking at on the 10 year, we’ll see if that gets penetrated soon.
