The Fuse
Equity futures are are rallying smartly this am following strong earnings by Meta and a rather ‘dovish’ tone last night from the Fed’s Japy Powell. Stocks are poised to rally for a second straight session as volatility starts to recede. That could continue following tomorrow’s job report.
Interest Rates are slightly higher this morning but notice the 10 year fell sharply on the day after the Fed decision. The yield is right near 4% now with an assault coming. Bank of England lowered rates for the first time in years today. Fed futures are aggressively pricing in more rate cuts than the Fed is likely to deliver.
September looks likely for the first rate cut by the Fed in years, Chair Jay Powell signaled it could be on the table IF the data were leading to lower inflation. It’s been a long while of tight monetary conditions were established, the economy remains strong as does the labor market. In Europe the Stoxx was down. .2%, crude oil continues its strong gains and gold is higher, at new highs. Stocks in Asia were lower, Japan down 2.5% while in China Hang Seng and Shanghai down a fraction.
Earnings last night for Meta were a blowout win, a very strong number solid guidance has this stock pacing the action today. Qualcomm and Arm also delivered strong numbers but did rally sharply from the open and receded a bit. These pullbacks may provide a nice buying chance. Carvana also beat and raised guidance, while Crox and Moderna disappointed this am. Tonight we’ll hear from Apple, Amazon, Intel Coinbase and Roku along with DraftKings and Square.
That was quite a comeback on Fed day! A ver robust move on good turnover as markets just leaped over recent resistance levels. Led by the charge in the Nasdaq stocks are now ready to rumble higher. The Fed meeting is behind and there will be little news other than earnings and economic data (and money flows) to drive the action.
Good but not great breadth yesterday, as some were not intrigued as much to bring themselves to the bull party. That’s fine, the mqrket does better when it is climbing the wall of worry. It is problematic if there is no followthrough, but we may get that in a couple of sessions. Oscillators were strong and and rose up again, new highs expanded – thanks to strength in the Russell 2K.
Decent volume trends yesterday bode well for a strong finish to the week. We often see strong money flows and volume at the start of a month, which is today. Heady earnings are likely to be the driver of performance, markets are not quite overbought as of yet. Sentiment is also sideways, fear/greed is now reflecting fear as the markets are ready to rise. Heavy turnover in bonds was notable yesterday.
Finding support levels becomes easier but a bit messy when stocks are in high volatility moves like they are now. VIX at 16% means we can expect 1% moves, and that has been happening. The SPX still has good support at 5450 and now is trying to re-establish the 5500 area. Nasdaq surged and has 19,200 to hold onto as support, below there is 19K and 18,700. Sure seems the index is looking to make a run at 20K.
The Internals
What’s it mean?
Pretty strong statistics in the internals yesterday but the end of day selloff did take some shine off the session. Ticks were mostly green all session, lots of buy programs. ADD and VOLD strong most of the day, VIX fell, rallied then fell again! Put/call remains low. There is some good opportunity for a longer bullish advancement if they take control.
The Dynamite
Economic Data:
- Wednesday:ADP employment, employment cost index, PMI, pending home sales, FOMC interest trade decision, Powell press conference
- Thursday:Jobless claims, US productivity, US PMI, ISM manufacturing, construction spending
- Friday:Labor report, factory workers
Earnings this week:
- Wednesday:ADP, BA, CNHI, DD, KHC, MAR MA, RDWR, TKR, CAKE, EBAY LRCX, META, QCOM
- Thursday:ADT, COP, CMI, ETN, HSY K, LH, SHAK, UTZ, AAPL, BZH, NET, AMZN, DASH, ROKU, SNAP, OLED
- Friday:CVX, XOM, CHD, LIN, PIPR
Fed Watch:
The day has arrived, could this be the change many have been waiting for? The Fed kicks off their next two-day meeting on Tuesday and is likely to leave policy on hold one more time. The FOMC has not moved rates in a year but that may be changing with the September meeting, which fed futures are pricing in a 100% chance of a cut. We’ll be listening to the language and if the committee sees the trend in lower inflation continuing, the strength in the economy and the risk of imbalances in the system.
Stocks to Watch
Bonds and Rates – With the Fed meeting this week there is likely to be a sea change in bond yields, which could move sharply lower if the statement is perceived as dovish. No expectations for a rate cut this time around though, but certainly in September. We’ll be watching the 4.2% level on the 10 year.
Apple – the big device company reports earnings this week and while the stock is off all – time highs from a few weeks ago, there is the promise of an AI phone coming which could be a massive refresh of iPhones worldwide. This may not be a great quarter but it’s all about the guidance.
Microsoft – The stock was hit hard last week following the CrowdStrike debacle. Can they get their mojo back, and will they continue to see expansion in AI, spending and data? These areas lifted Microsoft last quarter and will be watched carefully. Looking for a high single digit gain in earnings this quarter, the stock is off 10% from recent highs.
