The Fuse
Equity futures are backing away here after a strong couple of days where the indices are trying to fade away from the light. It’s been a volatile week to say the least, better than 2% moves down and then up as traders try to push April towards the green at the finish line. Five more trading days to do it.
Back to higher rates in a risk off mode in bonds. We had good strength in fixed income yesterday with a solid drop in yields but that did not last too long. Long bonds may not stay too looking below 4.25%, that is a level the market is battling with and interestingly is where the fed funds rate is currently. Futures market is pricing in four rate cuts this year, the first one coming in June (60% chance).
Stocks are down modestly across the board after some overseas selling hit the board. STOXX in Europe down slightly, France and Germany down even more than the index. Gold is ripping higher again today, the metal has been quite volatile of late, silver also higher. Crude is gaining ground, up .8% as the US dollar fell.
German 10 yr bund yields fell .2%, 10 yr US treasury yields off 3bps, in Japan stocks were up .5% while Hong Kong was down sharply about 1%, Shanghai remained steady.
Earnings from IBM were pretty solid but the stock is getting hammered on future concerns of their business. Chipotle’s numbers were atrocious but ServiceNow put up a nice win as did Lam Research and Texas Instruments. Las Vegas Sands mostly in line. This am Southwest is down after Alaska Air pulled their guidance, Pepsi missed and guided in line, Merck had a nice beat as did Valero.
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.
That was some day of trading. Following the words of President Trump about his view on Chair Powell and a near deal (maybe?) with China the market liked what it heard and rallied sharply to start the day and pushed to highs near midday but some more chatter about slowness got in the way and sellers came in, naturally after a couple of strong sessions. We are really looking for calm waters for a few days after multiple 2%+ sessions.
Some good breadth and volume yesterday, the bulls had their way and pushed the indices upward with a better than 3-1 advantage. That puts breadth in a buy signal now, but oscillators are very overbought and due for some sort of corrective phase. That does not have to be crippling though, turnover was pretty good but not enough to call it an accumulation day. We look for better turnover in the days ahead as we approach the end of April (next week).
We’re going to stamp that 5,100 level as good support now on the SPX 500, yet the 20 day moving is now where the fight is at. There is little reason to fight the trend, which is down but a few more sessions above that level (5,384) and there is room to move towards the 50 ma at 5,689 where some fireworks will definitely be lit. Nasdaq is impressive and stands out, with so many big tech names delivering earnings (next week) it could be a barnburner.
The Internals
What’s it mean?
Back to bakc winning sessions, who could have imagined that? Wednesday was a wild session with big movements up and down but the trend for the short term is now higher. How long that lasts is anyone’s guess but the long term trend remains down. Ticks were strong again but some red came over the last couple of hours to tarnish that indicator. ADSPD nearly did another trend day, rare feat. VOLD was up but not all that impressive, VIX pushed down most of the day but did finish well of the lows, some premium still being added by hedgers.
The Dynamite
Economic Data:
- Thursday:jobless claims, durable goods, existing home sales, Minny Fed President Kashkari
- Friday:Consumer sentiment
Earnings this week:
- 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.
