The Fuse
Equity futures are down modestly on this first day of the new month. April notoriously gets off to a slow start but after the March disaster it will be a relief to see some buying. Stocks did finish in the green yesterday but the month was miserable, better than 4% down in most indices, wiping out some hard-earned gains from that last few months. Uncertainties abound, tomorrow is tariff day.
Interest Rates are slightly lower as a safety trade into bonds is live. Rates nose-dived yesterday under the same circumstances as money flowed away from stocks into bonds. Fed futures moved are seeing perhaps 1 1/2 cuts by July, probably a bit to ambitious still.
Stocks are under some pressure this morning as VIX is well bid, gold hitting new all-time highs. In Europe stocks jumped .8% on good turnover, France and Germany both climbed. The dollar was flat, gold up 11 bucks to a record 3,162 per ounce. German 10 year bund yields fell 4bps, US treasury declined by 2bps. Stocks in Asia were mixed, Japan flat but Hong Kong and Shanghai sported gains.
Earnings are sparse again this week but we’ll get a brief preview of business from the first quarter. We’ll hear from PVH, NCNO, RH, Guess, Blackberry, Acuity Brands and some smaller companies. Big banks will be out next week.
It appeared a followthrough day was happening early Monday as the indices fell sharply in the first hour of the day. The SPX hit below 5,500 which was underneath the March 13th lows, the Nasdaq really took a beating and once traded under 19K but did managed to finish well above the lows, though flat on the day. The indices were saved by some big buy programs in the last two hours of the day, but damage has been inflicted on the chart. New month starts today.
Breadth started off really bad, better than 4-1 negative but improved throughout the day to closed about flat. We’ll call that a win for breadth, a much needed one. Oscillators remain bearish but new lows did not expand as much as Friday so this indicator remains neutral, though it could certainly explode bearish at any moment.
Turnover was pretty strong, this following a very dark session Friday, with some carryover selling from that day. That continued for awhile until the bulls stepped in to start picking up some scraps. We should see more volume hit later in the week with some news events driving the action, including tariffs and the labor report on Friday, along with Chair Powell speaking.
We suggested the other day a test of the 5,500 level (March 13 low) was in order and that happened yesterday. Any harm done? We’ll have to see but certainly the lower high, lower low in the chart is not bullish. However, we may have seen a washout in the Industrials, which really moved well all session long. As usual, a followthrough day would give us much more confidence in this one day rebound. Nasdaq pushed lower and tested 19K but finished nicely above it.
The Internals
What’s it mean?
Following Friday’s horrific session we saw a bit more selling at the open but that dam was shut by midday. Buyers stepped in a suddenly a reversal was at hand, the internals captured it. ADD and VOLD finished right near the highs of the day, ticks were fairly concentrated with large buy/sell programs all session long, the put/call rose up but the VIX finished well off its lows of the day, which may bode well for later in the week..
The Dynamite
Economic Data:
- Tuesday:ISM, construction spending, JOLTS, auto sales, Fed Pres Barkin
- Wednesday:ADP, factory orders, Fed Governor Kugler
- Thursday:Jobless claims, trade deficit, services PMI, ISM, two fed speakers
- Friday:non farm payroll, Chair Powell, Govs Barr and Waller
Earnings this week:
- Tuesday:NCNO, SPWH
- Wednesday:BB, ANGO, CGNT, RH, PENG, BSET, CLIR, FC, RGP
- Thursday:CAG, GES, SLP, AYI, LNN, KNXT, LW, MSM
- Friday:N/A
Fed Watch:
After last week’s rather hot inflation number we have quite a few fed speakers coming out with speeches this week, including Chair Powell on Friday. That will be following the jobs report, which is going to be another pivotal data piece. Jobs have been strong for a few years but if they start to show cracks there may be action needed by the Fed down the road, but not right away. Inflation in the interim remains a problem and may only get worse with tariffs.
Stocks to Watch
Volatility – We again watch the VIX as it is now above all of the futures contracts. That condition does not often last for too long before easing up, but the uncertainty abound is making investors quite worried and nervous.
End of Quarter – Monday is the last trading day of the first quarter and it has been awful. The worst performance for the SPX 500 in about three years, stocks are reeling just before the start of earnings season. It is foolish to be bearish before earnings begin but hard at this time to be bullish, too.
Gold – Hitting a new all-time high this week was impressive, what is the message from the metal? Certainly there is something there, other commodities have shown good strength as well including copper, which hit all-time highs last week before the tariffs start to hit.
