The Fuse
Futures are rallying a bit this morning but well off their overnight highs. Stocks were pounded into the ground Monday following a three day weekend. Buyers were in no mood to add stocks has gold and volatility were up, stocks and bonds were down. This could be your turnaround tuesday but if it fails, more down towards the recent lows is expected.
Interest Rates on the long end of the curve are slightly lower this morning as bond traders pick up some bargains. We still see the belly of the curve flattening out, fed futures seeing a strong chance of a rate cut in June. If the data fits, then that could be appropriate but with so many uncertainties were are far from there.
Stocks are trying to rebound from yesterday’s hammering. In Europe the STOXX fell in kind with US markets, down .7% led by decreases in France and Germany. Gold continues its very strong rally, touching 3,500 per ounce last night before backing off. Crude is also higher by 1.5%. The US dollar index was flat, so were German 10 yr bund yields. US 10 yr treasury yields rose up 1bp, stocks in Asia were mixed with Japan down slightly, China’s markets gained some ground.
Earnings this morning from Elevance were a nice beat but guidance just in line, while Lockheed Martin beat reduced guidance. Northrop Grumman was slammed after missing profit objectives, Verizon also missed. GE with a nice beat as it is popping in the pre-market. Danaher rebounded while RTX is getting hit on a miss. Tonight we hear from Tesla, Intuitive Surgical, SAP, Capital One and more. Tomorrow it’s Boeing, T, Vertive and Checkpoint Software.
It’s all about earnings this week, the market will be focused on the biggest week so far and looking for clues. No doubt if a company cannot beat they will blame supply chain issues, tariffs and bad policy initiatives.
Nothing good lasts forever, and in the case of the stock market we can’t even get two days up in a row. Monday was an atrocious session from the start of trading. It got worse as the day wore on as the SPX 500 tested the 5100 level late in the day and found some buyers there. Breadth was anemic, nearly 6-1 negative as the oscillators moved down sharply. Price oscillators went down though and remain bearish. We’ll see if there is a turnaround Tuesday, but not likely.
Volume trends were higher and bearish today, plenty of sellers out to distribute stocks. Higher turnover means a heavy distribution from professional sellers, simply put funds are not holding onto stocks right here. That could change of course, we did see a slew of buying a couple weeks back when the tariffs were put on hold for 90 days, but much of those gains have now been wiped out.
A push down to 5,100 was not expected but with elevated VIX there is always the chance. A VIX at 34 means 2% moves are being priced in, and we had a bit more than that yesterday. Nasdaq took the brunt of the punishment but so did the industrials, down more than 3% at one point. Support for Nasdaq is still 17.2K, while the Industrials have some support around 37.3K, which really puts this index behind a wall.
The Internals
What’s it mean?
Back from the three day weekend buyers were nowhere to be found. In fact, the only things that were hot today were gold and volatility, both of which spiked hard to the upside. Notice the heavy red ticks, that means big time program selling yesterday, awful action. VIX did come down off the highs but still racked up a 14% gain on the session. VOLD and ADD were miserable and point to more downside this week as the bulls from last Thursday were burned again.
The Dynamite
Economic Data:
- Monday:Leading indicators
- Tuesday:Fedspeak x 3
- Wednesday:More Fedspeak, flash PMI, New home sales, fed beige book
- Thursday:jobless claims, durable goods, existing home sales, Minny Fed President Kashkari
- Friday:Consumer sentiment
Earnings this week:
- Monday:WRB, CMA, MEDP, CADE, AGNC
- Tuesday:VZ, GE, LMT, RTX, DHR, DGX, HAL ELV, SYF, KMB, TSLA, ISRG, ENPH, SAP, COF, BKR, RRC, WFRD,STLD
- Wednesday:BA, T, VRT, APH, NEE, CHKP, PM, GEV, VIRT, ORLY, ALK, IBM, NOW, CMG, CCS, NEM, TXN, LRCX, LVS
- Thursday:AAL, FCX, NOK, LUV, MRK, PEP, NDAQ, VLO, UNP, INTC, GOOGL, CLS, TMUS AEM BYD, VALE, DOC, SKX, WY
- Friday:SLB, ABBV, PSX, CL, POR, SAIA, CNC, CHTR, LYB
Fed Watch:
With a potential for stagflation in our midst it makes sense fed officials are going to be more cautious. They still see evidence of inflation remaining a problem and even bolstered by tariffs. A slew of fed speakers out this week will hopefully give us some clarity.
Stocks to Watch
Earnings – This weeks starts the heaviest week of earnings for Q1 and we’ll get a nice sampling from various sectors. As beaten up as the stock market is this month it’ll be important to listen to these firms to get a clue of how worried they are about the economy going forward.
Tesla – After a horrendous Q4 report investors are hoping for a rebound. Yet, some estimates seem to believe the company did not have a great first quarter, it’ll be interesting to hear what Elon Musk has to say and tries to spin the news towards a favorable tone.
Volatility – Once again we are watching the VIX closely along with other risk off assets like gold, silver and bonds. The VIX retreated recently but still remains elevated with so much uncertaintly about.
