The Fuse
Equity futures are mixed after a volatile overnight session. Stocks were hit hard after news of new tariffs hit the wires. Stocks are sitting in a tough spot here, wanting to go higher but without much momentum to push them. It is quite possible this week was just an oversold rally and the trend will resume down.
Interest Rates are again on the rise today, pushing up on the long end of the curve as bond sellers unite. The 10 yr remains in a solid uptrend and is making a move towards 4.5%, it is now in the range of the Fed Funds rate (4.25-4.5%). Gold is ripping higher today
Stocks look to open a bit lower today as they follow Europe which was hammered down 1% last night on heavy volume. France and Germany both fell more than 1%, the dollar was flat but gold and silver surged. Crude is barely changed. German bund yields (10 yr) were down 4bps, the 10 yr US treasury yield rose by 1bp. In Japan the Nikkei fell .6%, Hong Kong up .4% while Shanghai was higher by .2%.
Earnings from Verint were poor as was guidance, Petco beat but offered mixed guidance. Tonight we have Lululemon on tap.
Just a nasty session yesterday with little buying at all on this risk off session. Things went from bad to worse as rumors of more tariffs hit the tape. After the close, President Trump announced tariffs on cars coming from overseas effective next week. The rumors sent stocks swirling down the drain, losing much of the gains from a strong Monday. Just three more sessions before the end of the month and quarter and they are likely to be wild.
Miserable breadth but this indicator clings to a buy signal. If we see more bad breadth today we are likely to see this flip around to a sell. That would be a bad sign for the bulls and likely lead to lower prices. Oscillators are mixed but are both threatening to move lower.
Volume trends have been weak on the upside and downside, plenty of reasons why we are not seeing market activity. Next week’s tariffs have everyone a bit skittish with worry, we are near then end of the quarter and not much interest to pile money in before next Monday is over. Perhaps the new month will attract some fresh capital.
It seems that 200 day moving average was not going to provide the lift everyone wanted to see. A good surge above there Monday with followthrough (though tepid) appeared to be the trick, but yesterday’s failure to hold makes this simply a rally within a downtrend. If this 200 day ma becomes a battleground it could get pretty volatile. The Nasdaq has support down at 19,200 if it decides to fall further.
The Internals
What’s it mean?
Just a miserable day for the bulls as stocks got whipped hard from the opening bell. A catalyst of course was more tariff talk, and a no-bid day was born. Yields were up too, the selling hit hard all session with big sell programs, look at the ticks. VOLD and ADD were down all session, these breadth indicators are near sell signals. put/calls were elevated again, VIX up but off the highs of the day. There is a negative evening star pattern on the SPX 500 chart now, bearish.
The Dynamite
Economic Data:
- Wednesday:Durable goods, St Louis Fed President
- Thursday:Jobless claims, GDP revision, trade balance, retail/wholesale inventories, pending home sales
- Friday:income/spending, PCE, consumer sentiment
Earnings this week:
- Wednesday:DLTR, CHWY, JKS, PAYX, CTAS, MVIS, WOOF, VRNT, JEF, HBF
- Thursday:WGO, SACH, IPHA, LULU, BRZE, KULR, OXM, SKYH
- Friday:IPA, SLE, ZSPC, LIQT
Fed Watch:
The Fed came and did their thing last week, deciding to keep rates where they are and not offering too many clues as to their intentions. They did talk about starting to put an end to the QT program, reducing their sales of bonds to prevent a major liquidity crunch. As or inflation, Chair Powell believes tariffs will be a drag on the economy and bring up inflation, at least in the short term. A couple of fed speakers out this week talking up the economy.
Stocks to Watch
Banks – Financials have started to show better relative strength. No doubt they will be the leaders into the new month as earnings season gets underway in April. Top of the charts is JP Morgan but we will also be watching Goldman, Morgan Stanley and Citigroup as those names rally to the 20 day moving average.
Market Volatility – The VIX continues to be the story of late. The fear index has been on the rise lately and remains stubbornly high. However, release of the Fed notes last week pushed volatility sellers to work the VIX downward. Uncertainty over tariffs keeps a bid in the VIX though, we’ll see how much movement in the markets happens./span>
Tariffs – With the April 2 deadline looming towards across the board tariffs on other countries, we still have some uncertainty whether these are going to take hold or not. That is causing some angst but when the deadline passes (assuming it is not extended) we will have more clarity.
