The Fuse
Equity futures are gaining a bit of ground this morning as traders look for some clarity in jobs and the economy this morning. Jobless claims, ADP for August along with productivity, PMI and ISM data will be released. We have really not had an inspiring day of trade yet this month, September is often cruel to the bulls but we’ll see what happens into next week.
Interest Rates are slightly lower as bond investors make some adjustments before Friday’s labor report. With only a couple weeks left before the next Fed meeting and plenty of data to work through we will continue to see more wrangling. 2 year yields are still pointing lower and portray a more aggressive fed stance, high yield rebounded yesterday.
Stocks in the Euro zone were up very modestly overnight, STOXX index up .1% , but France declined and Germany rose. FTSE was flat, US dollar index rose .1%>. Gold is pulling back from all-time highs but still hovering above 3,600, silver also strong and above $41. Crude oil is down 1.3%, OPEC+ may be increasing supplies. Yields are falling in Germany as bund yields were off 2bps, US 10 yr treasury yields off 1bp, and in Asia Japan with a strong gain of 1.5%, Hong Kong down 1.1% and China’s index down 1.3%.
Earnings from Credo were outstanding and matched with huge guidance for the next quarter and year, stock is up 10% (we have this one in our swing trade portfolio). Salesforce beat but guidance was bit light, same with Gitlab. American Eagle cleared some major hurdles. Tonight we hear from Lululemon, Broadcom, Asana, Guidewire and DocuSign.
Market churned most of the day but mostly higher, thanks to strong performances from Google and Apple. Those two names were up strong but much of tech-related names were weaker. We are seeing much more rotation these days out of the ‘household’ names, which eventually is going to be healthy for the markets to move higher down the road.
Breadth was positive but barely, most of the action was churning. Under the hood the poor breadth recently has been a ‘payback’ from Jackson Hole Friday. What does that mean? Not much conviction to followthrough on that day. That is not necessarily fatal for the rally t to continue but it would be nice for the bulls to see a few positive breadth days that dominate the bears.
Lighter turnover yesterday, not a bad thing but certainly a bit of short covering early and then a yawner the rest of the day. Given the fact jobs data is due out tomorrow it makes sense for bulls and bears to hold some dry powder before the print. If the jobs report is strong we might see a huge burst of selling, especially in fixed income.
We are still looking for a pullback to test some levels but going sideways has a tendency to let the moving averages catch up to the current price. If that happens we might suddenly have the dip buyers come in for a buying opportunity. If the market corrects further though it’s a ‘no touch’.
The Internals
What’s it mean?
After yesterday’s miserable internals there was not much better overall. Sure, the ADD was positive but the VOLD was not, nor was the ADSPD. TICKS were mostly red but the VIX fell all session and finished on its lows. Put/calls remain stable. Just nothing exciting about the day even as it was an up session.
The Dynamite
Economic Data:
- Thursday:jobless claims, ADP, productivity, trade deficit, ISM services, fedspeak
- Friday:jobs report for August, wages
Earnings this week:
- Thursday:FLWS, SCVL, TTC, DAVA, CRMT, GIII, CIEN, BRC, DLTH, AVGO, LULU, DOCU, PATH, IOT, BRZE, CPRT, GWRE, TTAN
- Friday:ABM
Fed Watch:
We have heard quite a few opinions from the those on the Fed about how/when monetary policy should shift. On Friday Governor Waller said ‘lets just get on with it’, meaning a rate cut cycle should start. That is not exactly where Chair Powell resides, his opinion weighs heaviest. Data still seems to show inflation is elevated beyond the Fed’s target but labor this week is going to be a key number.
Stocks to Watch
Volatility – Once again, the market remains complacent and could be paying it back huge this week. The VIX is sublime, residing under 16% for awhile now. It is not bearish until it starts to rise, which could be at any moment.
NVIDIA – After strong earnings and guidance the stock took a hit on Friday. Can it stabilize and recover? Not much news to drive it in either direction, so maybe some base-building is in order.
Jobs – The August labor report will be watched closely on Friday to see if weakness continues from the prior months. It would only seem fitting after the BLS commissioner was dismissed to see numbers suddenly rise, but that’s a topic for another day.
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