The Fuse
Equity futures are rising slightly before the open as stocks try to continue their modest winning streak. The Industrials are up five sessions in a row as that index is once again crossed the 40K mark. Several names are contributing to that index as the relative strength and breadth are being lifted higher.
Interest Rates are slightly higher as fixed income traders await some key economic data today. Bond investors have been clamoring for fixed income for the last couple of weeks, the yield curve remains deeply inverted from fed funds futures. The curve is a message to the Fed to start cutting rates very soon.
Fed futures imply at least 4 rate cuts before the end of 2024.
Seems Warren Buffett has been busy in the makeup aisle! Berkshire has bought a stake in Ulta Beauty among other names, that stock ripping higher. In Europe the STOXX index climbed .3% while the dollar index fell slightly. Crude oil is on the rise, gold up about .7%, German bund yields and the US 10 year are flat. Stocks in Asia were mixed, Japan and Shanghai up sharply but Hong Kong was flat.
Earnings last night from Cisco were pretty strong as they guided higher as well. This morning Alibaba beat on the bottom line but missed on sales, Deere had a nice beat though, Walmart out today as well. Tonight we’ll hear from Applied Materials.
Not as much excitement today vs Tuesday. It was an up session nevertheless, with the best action coming from the Industrials. That averaged moved past 40K again, and frankly if told me nine days ago that would happen I would have laughed at you. But, here we are, and the Industrials are only 2.5% away from an all-time high. That would be something, but if volume dies down we could see resistance near those old highs act like bug repellant.
Breadth started out strong, of course supported by solid strength in the small caps but that faded away quickly. As we have often said the small caps drive the breadth, the breadth can drive the market action. It was a plus reading but not all that impressive. New highs are starting to build even more, NYSE oscillators are now green but Nasdaq remains in the red. Yet, one strong day will push Nasdaq to a positive reading which will help stocks move ahead.
The heavy volume was in the Industrials which leads us to believe that index could have nice followthrough. Nasdaq and SPX 500 did not finish well at all, and the IWM did notch a distribution day. It was a funny session, one would have though with a decent CPI that turnover would be brisk, not just from the news but with heavy short covering. Retail sales up this am, we’ll see how it goes.
The Industrials were all the rage Wednesday, and there is good support at 38,400. New highs are not far off from current levels, just another 1,200 points would do it. SPX 500 has good support now at 5,400, eyes are set for a move to all time highs at 5,650 – or 4% higher. Both of these indices are within striking distance, it can be done quickly.
The Internals
What’s it mean?
Dull. That’s what I would call the action from yesterday. Just nothing really there to spark any fireworks, though the broader market was higher. VOLD and ADD barely budged, VIX ripped lower and is now about 16%. TICKS were pretty evenly distributed, put/calls remain in a downtrend. This week has been tricky as every selloff opportunity has been bought up. Sounds bullish, doesn’t it?
The Dynamite
Economic Data:
- Thursday:Retail sales, jobless claims, industrial production, cap utilization, business inventories
- Friday:Consumer sentiment, housing starts, homebuilder confidence
Earnings this week:
- Thursday:WMT, JD, DE, BABA, AMAT, HRB, COHR
- Friday:FLS
Fed Watch:
Probably a quiet week for the Fed in front of next week’s summer conference in Wyoming, known as Jackson Hole Monetary Meeting. Chair Powell is likely to deliver the keynote speech, where he will likely reiterate the committee’s stance on policy, and probably to pull any surprises. This meeting has often been a place where clues and hints are dropped to the public eye.
Stocks to Watch
Volatility – VIX really spiked last week but has had a crash down move since Monday. With lower VIX comes more confidence from traders and investors. We’ll see if the trend continues this week with some big earnings on tap and inflation data.
July Inflation Data – PPI out on Tuesday, CPI out on Wednesday, Retail Sales on Thursday. Those are the big numbers to focus on this week as they will give us fresh data to help us and the Fed determine the direction on monetary policy.
Retail Earnings – It’s a big week for retail with Home Depot and Walmart reporting their quarter. The charts are not terrific but they both have often surprised to the upside when the worst is expected, like now.
