The Fuse
Equity futures are modestly positive at this writing as the bulls try to bring in a win this week. Yesterday’s drubbing was in the face of weaker than expected prices, which is a good thing with inflation coming down but there are other elements causing market consternation.
Interest Rates were all over the board last night, rising up on the 10 yr to nearly 4.5% and over 5% on the 30 year. That is not common when market are in such disarray, we often see a flight to safety. But it appears foreign countries are selling US treasuries in a big way and that is bringing on more supply shocks. The decision Wed to hold 90 days on tariffs was slightly driven by higher yields, which the treasury does not want to see happen. Fed futures still seeing more cuts than the Fed is expecting.
Stocks are pushing a bit higher to make an effort to gain a positive close on the week. Stoxx in Europe were up .4% led by sharp gains in France and Germany. The dollar index fell sharply, .7% but gold is ripping higher, a new all time high above 3,230 per ounce. Silver is also up. Crude oil is flat right at $60. German 10 yr bund yields climbed 3bps, 10 yr US treasury bond yields slipped 1bp, stocks were mixed in Asia with Japan down 3% but wins in China, Shanghai up .5% and Hong Kong up by 1.6%.
Earnings were sparse last night but we’ll hear from CarMax this morning and some big banks Friday morning.
No followthrough day for the markets, as the bulls could not pull off the trick. After such a spectacular day filled with good feelings, the bears went back to work yesterday and pulled the plug on the celebration. We should know that bear markets have some of the most spectacular rallies ever, and Wednesday was just another one of these. It was large in scope and size, but at one point the bears ripped nearly half the gains away in one fell swoop.
Poor breadth all around which has plagued the markets over the past few months. Sure, Wednesday may have been a watershed day but the indices could not even get past short term resistance. That tells you how oversold this market was coming into the day. Oscillators stayed negative and are worse off now, new lows expanding again over new highs.
Stocks have had extraordinary numbers on the volume side this month. Just the last five sessions has seen markets trade a phenomenal amount of stock, record numbers but mostly on the downside. We have had one up day in the last six and the markets are down hard since the start. With earnings season coming up and more names to roll next week it will be interesting the response from investors with volatility remaining so high.
Not much to say other than the bulls blew a chance to catch some wind at their sails. The one day wonder went flat, and now the bulls have to worry about testing the lows from Wednesday. That would be very easy to do here, it is only 300 points down and would be a bit discouraging, to say the least. Not being able to mount a rally past the 20 ma is disappointing, the Nasdaq also in poor shape. Let’s not even talk small caps, which are still in their own bear market.
The Internals
What’s it mean?
No followthrough. One day giveth, the next day taketh away. That is how the indices behave in a bear market. Many are different but the logic is the same; don’t stay too long or the bear will swipe at you. VOLD and ADD were dreadful, as mentioned early breadth was bad, nearly 9-1 negative. TICKS were mostly red all session, several sell programs hit during the day. Put/calls were up again, several days in a row above 1. That is normally a buy signal but in a bear market? Not yet.
The Dynamite
Economic Data:
- Thursday:jobless claims, CPI, Chicago Fed Pres speaks
- Friday:PPI, consumer sentiment, NY Fed Pres Williams
Earnings this week:
- Thursday:KMX, BYRN, LOVE, NTIC
- Friday:JPM, BLK, WFC, MS, FAST, BK
Fed Watch:
Stocks to Watch
Volatility – A moonshot of volatility hit last week during the first few days of April. A bit too much? Perhaps, but trying to wade back in is difficult at best, impossible at worst. If the VIX comes down sharply there could be a relief rally.
Tariffs – News of tariffs last week crippled markets here in the US and worldwide. The ramifications are still unknown but most economists believe this is a huge negative for growth. Will there be de-escalation or continued pressure on countries.
Earnings – We’ll have some earnings reports this week, mostly the banks get things underway. With the sharp moves down in this group lately it will take some very soothing words to get investors back in the game.
