The Fuse
Equity futures are rallying this morning in a continuation of last week’s late run. Without too much fanfare the SPX 500 has quietly moved back towards the 50-day moving average, an area of stiff resistance. If that can be reclaimed and confirmed then the bulls would have turned the tables, and up we go.
Interest Rates are sliding downward as the bond market prepares for the coming Fed statement and follow-on press conference. Consensus has the committee standing pat here and for the foreseeable future. Citi today believes the first cut is coming in July, the first of four cuts this year. That is wishful thinking on our part.
Not much to stir the markets up over the weekend, which is fine because there will be plenty of news to wrangle over this week. Tuesday is the last day of trading in the month of April, which appears likely to be a down month.
Earnings last week were mixed but the market liked what they heard from Google and Microsoft. We are starting the biggest week of earnings now and of course names like Apple and Amazon will be delivering their numbers. Domino’s dropped strong earnings this am, tonight we’ll hear from NXPI, Paramount, Logitech and Transocean. Tomorrow am has PayPal, Lilly, MMM, McDonalds, Coke and several others.
Stocks managed to finish a volatile week on a very positive note. The Nasdaq was dazzling, rising up nearly 4% to put it right near the SPX 500.
The Russell 2K, for its part rose up sharply even as interest rates steadied. Small caps are still in the red for 2024 but gained nice ground. As we approach the end of April, with only two trading sessions left the indices are still in the hole and will likely finish that way before the new month starts Monday. The action was much better even as a hotter inflation number (PCE) made everyone wonder about more hawkish Fed policy.
Pretty good breadth but not lights out. Still, a very strong showing as this indicator continues to flip back n’ forth between buy and sell signals. Oscillators are back above zero but barely, and that could help drive markets to improve. Yet, until some trend is established of higher lows, higher highs we are going to be seeing big swings up and down.
Volume is starting to pick up and that could be a double-edged sword. When the market is rising you like to see heavy turnover, and that happened Friday. However, big volume when the market declines as it did the prior day is a sign of distribution. These flip flops are going to confuse investors/traders and cause both sides to make errors. For now, volume trends are not flashing bullish signs, until that happens it’s best to keep things light.
SPX 500 made a remarkable move from the lows this week and closed right at 5,100. The index is still in a range, closer to the top however.
Russell 2K looks poised to make a run above $200 again, if it can get there at least a 5% move is likely. The recent support of IWM at 192 looks pretty solid.
The Internals
What’s it mean?
Pretty strong day for the markets but most of the action was front-loaded. What does that mean? Much of the heavy buying was in the first few hours, stocks went sideways after. We see that in the ticks, where heavy green until midday and then a mix of red and green. VIX moved lower and may approach the 14% area soon, VOLD was strong as was ADD but the latter finished poorly.
The Dynamite
Economic Data:
- Monday:
- Tuesday:Employment cost index, housing price index, consumer confidence
- Wednesday:ADP, SPX global PMI, ISM, JOLTS, construction spending, FOMC rate decision
- Thursday:challenger job cuts, jobless claims, productivity and labor costs, factory orders
- Friday:NFP report for April, ISM non-manufacturing, SPX global PMI
Earnings this week:
- Monday:DPZ, ON, SOFI, CLS, FFIV, HLIT, NXPI, WELL
- Tuesday:MMM, KO, GLOW, ETN, LGIH, MLM, PCAR, PYPL, AMZN, CZR, LC, MDLZ, PINS, SWKS, SBUX
- Wednesday:DD, EL, MA, WING, YUM, BZH, CF, CTSH, FSLY, MGM, QRVO, QCOM
- Thursday:CMI, CYBR, IDCC, LIN, PH, UTZ, VMC, AAPL, SQ, NET, DLR, FTNT, HOLX, MSI, OLED
- Friday:FLR, HSY, XPO
Fed Watch:
The third Fed meeting of the year as the committee grapples with higher inflation. That has been the case since the start of the year, a pretty frustrating situation for the committee. We have heard from several members there is no rush to cut rates. We may hear something from Chair Powell Wednesday to this effect. Fed futures are pretty much saying no more than one rate cut in 2024.
Stocks to Watch
Amazon – Earnings are out this week and the mega cap is looking to deliver another home run. The stock is well off the all time highs (10%)but could make a big run if investors appreciate what they deliver.
Federal Reserve – Big meeting again as our eyes/ears will be focused on Wednesday’s statement and the follow-on press conference. The committee is unlikely to move rates at this meeting but the tone may be more hawkish.
Employment – April’s job report is looking to be down from March, but only modestly. It has been the job market that has held the economy together, if it starts to falter the Fed may have to step in with some rate cut discussion.
