The Fuse
What are futures doing?
Equity futures are backing away again this morning but well off their overnight lows. Without much to guide the markets higher some profit taking is in order and could continue into Friday.
News
Some modest losses across the pond as the STOXX was lower by .2% led down by Germany but France gained .4%. FTSE down bigger, off .5%, the US dollar index was up .1%, crude oil is rallying while gold and silver are backing away. Yields are up 1bp in Germany and the US 10 yr treasury, while in Japan the Nikkei fell .7%, Hong Kong down 1% and Shanghai slight down at .3%.
Volatility
The VIX remains stubborn at the 18 level, we noted this recently. Stock sellers and vol buyers are picking up on this, there is a premium built in should things escalate in the Iran War (or any other uncertainty for that matter).
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Interest Rates
Rates are moving up modestly this morning on the long end of the curve as bond sellers are nervous in front of a weekend that might have some fireworks explode. The Iran War is in a ceasefire but that could hinge on progress or none at all. Unlike equity traders, bond traders see things with a bit more risk. 2/10 is rising a bit which is healthy for the economy at this point, high yield is strong while fed futures remain unchanged.
Earnings
It was earnings palooza last night with good numbers posted but not quite good enough. Tesla led the parade with a beat but the guidance was poor, the stock is getting drilled this morning. Same with IBM and ServiceNow, which beat but offered tempered guidance. Lam Research and Texas Instruments hit the ball outta the park, while Southwest guided much lower. This morning a beat from AXP and Blackstone, Dow posted huge losses but American Air beat handily.
Events
Stocks ripped higher yesterday as it appears the ceasefire with Iran and the US will be extended a few more days. The markets believe that is progress, and we could be near the end of this very challenging period. The extension of the truce gave some traders the feeling of relief, and though some shorts pressed on Tuesday they were rebuffed by a surge in buying. New highs hit again yesterday but it was not demonstrative.
Breadth
We did not see the great breadth indicative of strong days recently, and that has us a bit concerned. No question the markets are starting to feel some exhaustion, but that may only be temporary. The a/d line was positive, and the oscillators rose up slightly and are still in positive territory. New highs continue to thrash new lows.
Volume
New highs for the Nasdaq and SPX 500 on low volume does not inspire confidence in the next move. In fact, we could see a pullback any day now just to reset the uptrend. A slight retreat is enough to wipe the froth and really see where buyers are located. Given the large move already on the books any move back on moderate turnover should be welcomed.
Support Levels
More new records for the Nasdaq and the ‘500 but again we seem to be rather stretched from the supporting moving averages. The higher and longer we go the more painful the down move will feel no matter how quick it happens – and it might be very fast. Traders are aware of this and continue to buy cheap put protection just in case it happens sooner rather than later.
The Internals
What’s it mean?
More weak breadth and action in the markets, the internals are just not responding well at the moment. IWM was up but the VOLD and ADD were lower, tells you distribution was heavier in the big cap names yesterday. Ticks were actually about equal, buy and sell programs all day long. Put/calls actually came down as did the VIX, finally settling in below 19%. We’ll see if that holds in.
The Dynamite
Economic Data:
- Thursday: Jobless claims, PMI services, PMI manufacturing
- Friday: Consumer sentiment
Earnings this week:
- Thursday: NOK, DOW, BX, TXBI, STM, AXP, LMT, HBAN, AAL, INTC, NEM, EBC, BHR, COLB, BY, GBCI
- Friday: PG, CHTR, MOG.A, SLB, RPT, HCA, SXT, GNTX
Fed Watch:
Not much on the docket this week as the committee prepares for the late April meeting. This will likely be the last one as Chair for Jay Powell. The FOMC is unlikely to move rates at this meeting nor at any meeting in 2026.
Stocks to Watch
Intel – The big semiconductor company that was left on death’s doorstep has staged a remarkable comeback. Earnings out this week, we’ll see if they can finally deliver a strong quarter.
Oil/gas – Crude oil was smashed this week when it was learned the Strait of Hormuz would be opened. If it stays that way crude could fall to $75 or so and bounce.
Tesla – The first of the Mag 7 reports this week and it had a solid bounce to the 200 ma. It may pull back after earnings regardless of the number, but above $400 would be a good start to get long.
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