The Fuse
What are futures doing?
Equity futures are trading lower on the SPX 500 and Nasdaq but pulled up on the Industrials following strong earnings from Coke and a couple of other names. There is some negative thought surrounding the end of the Iran War going around that has perked up volatility and oil prices again.
News
The STOXX started off strong but has faded now to a loss of .3%, led lower by France and Germany. The FTSE lost a small fraction, US dollar index rose .2%, gold is getting drilled as is silver, crude oil is back above $100 per barrel. Yields are rising too, with German bunds up 2bps and 10 yr US treasury yields up the same. In Asia, Japan fell 2%, Hong Kong off .8% while Shanghai dropped .2%.
Volatility
That 18% was penetrated on the close yesterday but now that has become the buying level for vol traders. The VIX is back up again, higher by 5% early an looking to rise up more. With so much uncertainty, risk needs to be re-priced and that means lower stock prices, too.
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Interest Rates
Seeing a risk off day here but rates are rising as well, likely responding to the potential inflation from higher oil prices. 2/10 spread is rising but not for the right reasons, while we have 5, 10 and 20 yields bumping higher. High yield spreads remain tight as HYG and JNK are elevated, but a stock selloff will have negative ramifications. The Fed meeting starts today and no change is expected in policy.
Earnings
Strong earnings last night from Celestica and Codence are of no consequence today as they are getting punished. That may not last however, we’ll see how it goes. Coke put up a good number this morning and raised guidance, UPS beat and backed its year forecast. General Motors hit a monster beat and cautiously raised guidance, but Spotify missed. Hilton beat across the board.
Events
Strong effort by the stock market yesterday as it had every reason to move lower but did not finish that way. A new closing high printed on the SPX 500 but not in the other indices, but that’s quite alright. No doubt the action in the Nasdaq will be later in the week when those Mag 7 name report earnings, and the rest of the market may see a bit of daylight after the Fed meeting is concluded./p>
Breadth
Good breadth early on but that strong advantage faded as trading progressed. That is a bit discouraging, only because there was a chance for a breakout in cumulative volume breadth CVB but that did not happen. Yet, oscillators remain positive and new highs are crushing new lows significantly, with broad participation in several groups.
Volume
Lower volume on the day but a bit elevated in the small caps, that is not an issue though as the market was pretty choppy all session long. The back n’ forth was not flowing well at all, a lack of liquidity the major problem (or lack of interested buyers). Given the big news will be later in the week perhaps traders are holding their dry powder for a better time.
Support Levels
A modest pullback overnight but that was not during real time hours, so the markets remain stretched. However, the sideways action is very constructive, with moving averages just looking to catch up to the indices. That could be a few more days of chop for the MA’s to get there.
The Internals
What’s it mean?
Another average day of the internals, the VOLD barely climbed while the ADD and ADSPD were meh. VIX did manage to fall and now is threatening the important 18 area for the bulls. A couple closes below would be bullish. TICKS were mostly red on the day, especially on the NYSE, put/calls coming back down. Calm before the storm.
The Dynamite
Economic Data:
- Tuesday:consumer confidence, case shiller index
- Wednesday:durable goods, housing data, fed meeting decision/press conference
- Thursday:Jobless claims, GDP Q1, employment cost index, PCE, leading indicators
- Friday:PMI, ISM
Earnings this week:
- Tuesday:UPS, KO, GLW, SPOT, ECL, GLXY, GM, HLT, CNC, HOOD, BE, STX, TER, V, ENPH, OPK, MDLZ, NXPI, CSGP;
- Wednesday:SOFI, APH, HUM CAR, REGN, JKS, EAT, CNI, ABBV, MSFT, AMZN, META, GOOGL,, F, QCOM,, CMG, KGC, KLAC
- Thursday:COP, VLO,, CAT, W, LLY, MA, MO, MRK, BMY, CI, AAPL, WDC, SNDK, RDDT, RIVN, MTZ, AMGN, FSLR
- Friday:CVX, XOM, CL, LYB, MRNA, EL,, D, FLGT, TPG, LIN
Fed Watch:
An historic meeting this week as it will be the last one Chaired by Jerome Powell. His term as Chair ends in May, it’s been quite a ride for Mr Powell over the last 8 years and no question this man has done many great things for our country. No change in rates is expected.
Stocks to Watch
MAG 7 – It’s a huge week of earnings from the biggest names of them all. No question they will report strong numbers but after rallying smartly over the last few weeks, is there enough fuel to drive prices higher?
Fed Policy – The last meeting as Chair for Jay Powell is unlikely to yield much excitement. However, during the press conference he may talk about inflation and the rise in oil prices.
Oil – Crude oil prices have come back down as it appears the war may be over soon and ships may be allowed through the Strait of Hormuz. That would be a positive. Also, GDP first look is released Thursday am.
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