The Fuse
Equity futures are flat to slightly higher this morning, many traders are happy to wait until some Fedspeak drops later in the week. Chair Powell is out with a Jackson Hole speech Friday and I’m sure he just wants it all to pass without much fanfare. Many traders/investors are seeking some sort of guidance on rate policy thought that is unlikely to happen directly.
Interest Rates are slightly lower on the long end of the curve today as bond traders see value in a recent selloff. The 10 year hovers just below 3.9% while the 2 year is slightly above 4%. This implies the fed futures will likely be at that level 2 years from now (or near it). Fed futures are pricing in 3 rate cuts for the remainder of 2024.
Stocks continue to move upward as they see positive news coming from the Fed and other central banks. There is little to dispute the markets expectation of lower rates into the future. Europe was mostly flat while the dollar fell sharply. Gold is down about .5%, crude down about 1%. Stocks in Asia were mixed, Japan down 1.8% with higher volatility while Hong Kong and China gained.
Earnings calendar is pretty busy this week. This morning we heard from Estee Lauder as they beat on the bottom line, missed revenue and offered horrible guidance, the stock is down. Later today we’ll hear from Palo Alto and Fabrinet, tomorrow Lowe’s and Medtronic and few other small companies. By and large earnings season has been pretty decent.
The big event this week will be the Jackson Hole Conference, hosted by the KC Fed. During this conference we will hear from several Fed Governors and one in particular, Chair Powell. Will he guide us toward a new rate cutting policy which could begin in September? It is very likely and the market seems to be leaning in that direction. Other speakers will be just as important however, with Waller, Bostic and Barr chiming in. One worry here is did the market already anticipate this?
Breadth was very good again as this indicator remains on a buy signal. A new signal however from new highs and lows, with new highs trouncing the lows. That is a huge move for the breadth, this indicator is more intermediate to long term in nature. Oscillators remain strong and are now reaching toward overbought territory.
Volume trends were good on Friday, a double witching expiration day. Stocks ran up most of the session as option traders closed out positions to the close. Higher volume when the market is rising is a positive sign.
We will now view the 50 day moving average as good support for the Nasdaq. There is a gap above to be filled just below 19,800 and a few gaps below to be filled if this rally fails. The SPX 500 sits at a resistance level of 5,550, if it fails to move above here that woud the third failure at this level, which would then represent strong resistance. If that rejects the 20 day moving average at 5,413 is next level down.
The Internals
What’s it mean?
A pretty strong finish for the markets on Friday as the indices are now threatening all time highs again. The VOLD was up as was the ADD but not big like Thursday. Regardless, a followthrough day is important. Put/calls were lower which is starting a trend, those ticks were mighty green all session long, the VIX pushed down. This is an important week for the markets.
The Dynamite
Economic Data:
- Monday:Leading indicators, Fed Gov Waller speaks
- Tuesday:Fed President Bostic, Fed Vice Chair Barr
- Wednesday:Minutes of the July Fed meeting
- Thursday:Jobless claims, SPX flash services/manufacturing existing home sales
- Friday:New home Sales, Chair Powell speech
Earnings this week:
- Monday:PANW, FN, EL
- Tuesday:LOW, MDT, XPNG, TOL, COTY, KEYS
- Wednesday:TGT, TJX, M, DY, ADI, ZM, SNOW, SNPS, URBN, NDSN
- Thursday:BIDU, PTON, BJS, CSIL, CAVA, WDAY, BILL, ROST, INTU, RRGB
- Friday:
Fed Watch:
It’s all about the conference in Jackson Hole. Will they or won’t they and how much for how long? Those four questions may not be answered at once but certainly will be on the minds of traders/investors. Given the closeness of a policy shift and how we are near the next meeting makes sense for Chair Powell and the rest of the committee to lay the groundwork and remove the heavy uncertainty. If so, VIX will be on the move, likely down and markets higher.
Stocks to Watch
Fed Conference – The annual Jackson Hole Conference has often been the place were policy shifts were hinted at. Will Powell use this forum for the same? The market seems to be expecting as much but he is a good poker player, Powell won’t give too much away.
Retail – Last week with strong retail sales numbers for July and solid Walmart sales it was presumed the consumer remains strong. This week a new set of earnings from big but lower tier names will report like LOW, TGT, TJX, ROST and others. Watching their response.
