The Fuse
Stocks are looking to continue their rally on Tuesday as volatility is starting to recede. We saw the VIX pop a bit Monday as concerns over higher yields started to spread across asset classes. Equities rallied for the most part (save for the Industrials) but breadth was weak once again. We find ourselves still in the oversold camp.
Interest Rates are modestly lower this morning after the 10 and 30 year hit levels not seen since before the Great Financial Crisis. Inflation remains a problem and now strong growth may be a reason for the Fed to hike rates even further. We may learn more on Friday with Chair Powell’s comments.
Led by NVIDIA and Tesla, stocks managed to stage a modest rally but overseas markets are becoming a challenge. They often follow the US markets but lately are leading the way, and that has been downward. The next two weeks could see volatile moves up and down as trading desks thin out before the Labor Day holiday.
Strong earnings this am from Lowes, Baidu and Medtronic but a poor scorecard from Dicks Sporting goods and Macy’s and Coty. Candian Solar came out with some strong numbers. Tonight we’ll hear from Toll Brothers and Urban Outfitters, tomorrow Peloton, Kohl’s Analog Devices, Williams Sonoma and Advanced Auto Parts among others.
Jackson Hole Conference later this week where we’ll hear from Major Bank leaders, topping it off is Chair Powell, who decidedly spooked the markets in 2022 with a very hawkish speech.
Lousy breadth all day long but there was buying concentrated in a select few names. Technology and Nasdaq companies were the beneficiary of strong money flows Monday, with some followthrough we could see a bit more upside towards the resistant 50 day moving average.
Turnover was subpar even though Friday was a big expiration day (which had strong volume associated with it). Good turnover on the Nasdaq however as that index led the way.
The indices are still in correction mode and though SPY and QQQ were up Monday. the bigger/broader indices were down. A bifurcated market is tough to analyze and parse out, but resistance is still above the indices. Support is lower, so we are in a no-man’s land here.
The Internals
What’s it mean?
Once again, the internals really do not tell the story of the market day. Monday was up mostly with tech and SPY issues, but the internals struggled all session long. Breadth was poor, VOLD barely back to the flat line while ADD was negative. VIX volatility sellers took control from the start though, and notice finally a down session for put/calls. If that continues this indicator could flash a buy signal (many more days though).
The Dynamite
Economic Data:
- Tuesday: Retail sales ICSC Richmond Fed, Existing home sales
- Wednesday: S&P Global PMI Flash, New Home sales data
- Thursday: Jobless claims, Durable Goods, KC Fed manufacturing index
- Friday: Jackson Hole conference (Powell speaks), Univ of Michigan confidence
Earnings this week:
- Tuesday: BJ, COTY, CTRN DKS, LOW, M, LZB, URBN, TOL
- Wednesday: AAP, ADI, FL, KSS, DY, PTON, WSM, ADSK, GES NTAP, NVDA, SNOW SPLK
- Thursday: BBW, BURL, DLTR, AFRM, GPS, INTU, JWN, MRVL, ULTA, WDAY
- Friday: n/a
Fed Watch:
It’s the big Jackson Hole Conference later this week, and if you recall Chair Powell’s last appearance there (2022) he brought down the house – so to speak. Stocks were punished and led a path towards the October lows as the Chairman reiterated a hawkish view on interest rates. A year later much has changed and we don’t anticipate the same rhetoric, but it could be market-moving.
Stocks to Watch
NVIDIA – Earnings are out midweek from the big chip maker and many are wondering if NVIDIA can once again pull off a big quarterly report.
Interest Rates – Once again, rates rose up this week and tagged levels not seen in about 15 years. There was a pullback of sorts on rates Friday but plenty of selling in the bond market all week long.
Volume – As we pass a big expiration day on Friday we may see volume levels start to quiet down, approaching the Labor Day holiday. That makes for some erratic movements. We’ll also be watching crude oil as it climbed once again this past week.
