The Fuse
Equity futures are rebounding after another dismal finish on Wednesday. Stocks remain under intense pressure as the SPX 500 finally fell and closed below the important 50 day moving average. If stocks cannot recover above this level soon (4,450) then there is a strong possibility we visit much lower targets such as the 100 and 200 moving average.
Rates are rising again as bond sellers remain active. The 10 year yield pushed up past 4.2% for the first time since March and the highest level since October 2022, when markets started to rebound from their lows. It’s curious to think rates are high and the stock market is up nearly 30% or more since the last time we were here.
Meeting minutes from last month’s Fed session were released and showed most members favoring higher rates. That did not move the needle for fed funds futures markets, which continue to see only an 11% chance of a September hike coming. But, the odds of rate cuts in early 2024 have been reduced drastically. Bond yields closed at their highest level in 15 years following the release. China’s economy remains a problem too, with money flows coming out of those stocks over the past several days.
Very strong earnings from Dow Industrial names Cisco and Walmart have helped put a bid under stocks. Also a strong report from tech name Synopsis is helping to push that sector higher. Today we’ll hear from Applied Materials and Ross Stores (yesterday competitor TJX had a strong earnings report).
Another down day for stocks but yesterday it took a bit to shake the trees. We saw some green early as some buyers stepped in but frankly there was no conviction to buy and sellers were simply waiting to pounce following the release of the Fed’s meeting minutes.
Breadth remains an enigma. Stocks are up but breadth underneath the market remains bad. New lows are printing at a higher right now vs new highs, and that is troublesome to the bullish case. We saw this happen in 2018 and it led to a very nasty outcome late in the year.
Heavier turnover is a sign of institutional distribution. We have seen those days pile up lately and yesterday was another one. The market is in a corrective mode here, and rallies will be sold off.
The SPX 500 closed right near 4,400, an area of support we cited earlier this week and on the daily bites. That’s no accident, but more importantly the Nasdaq 100 finished under 15K, and with a confirmation today that’ll be an ominous sign. 4,330 is next stop.
The Internals
What’s it mean?
In a near repeat of Tuesday, the VOLD was flushed down all day long from the start with nowhere else to go but down. The ADD and ADSPD followed this indicator lower too, the VIX rose up closed at the highs of the session. Seems the fed meeting minutes were enough to hit the pause or even raise rates, the put/call ratio has been on the rise and closed over 1 for the first time in months. Very negative signs for the markets.
The Dynamite
Economic Data:
- Thursday: Jobless Claims, Philly Fed Index, Leading Indicators
- Friday: Eurozone CPI, Japan CPI
Earnings this week:
- Thursday: LITE, TPR, WMT, AMAT, FTCH, ROST
- Friday: BKE, DE, EL
Fed Watch:
Fed meeting minutes were out yesterday, .
Stocks/Issues to Watch This Week
Options – A big options expiration this week with a slew of equity options expiring Friday, always volatile.
Retail – Huge week for retail stocks as the ‘big names’ will deliver their earnings releases, along with retail sales Tuesday morning.
Nasdaq – This index has now fallen below the 50 day ma for the first time since early March, when the Nasdaq went on a monster run higher. Let’s see if the Nasdaq repeats the pattern.
