The Fuse
Equity futures are rallying smartly this morning as the crowd awaits word from some Fed speakers at the Jackson Hole Conference. That event is kicking off today, Chair Powell with a speech on Friday morning. Some important economic data released later on this morning (PMI flash) and jobless claims.
Interest Rates are rising a bit this morning as bond holders take some profits from recent gains. We have seen bonds starting off the day slow but picking up steam as the day wears on. Fed futures are still aggressively pricing in big moves by the Fed, which may soon be challenged by Chair Powell at Jackson Hole.
Stocks in Europe rose nicely overnight, up .3% on the STOXX. That led to gains in Japan and Hong Kong, China’s Shanghai market was lower.
Gold is off about 11 bucks while crude is up .5%. The dollar is flat. US 10 year treasury yields down 1bp while German bunds are flat. Stocks are up strong for the month of August and with six sessions remaining and a near overbought condition, the market looks vulnerable to pullbacks.
Earnings last night from Snowflake were a huge disappointment. Synopsis beat on the bottom line but missed on revenues, Zoom beat but is only up a fraction. This morning good report from Baidu
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?
Solid bounce back for the indices, which rallied sharply after the release of July’s Fed meeting minutes. In this document the committee had a rousing discussion about interest rate policy, and one could tell by the contents of the minutes that the discussion was intense. For the most part, the committee sees rate cuts coming before year end, and likely a September cut is on the table. Beyond that the data will be their guide.
Some good turnover for the SPX 500 and SPY today along with the IWM, which were the strong performers. Decent volume as well for the Nasdaq as the oscillators turned back up after a brief pause Tuesday. New highs are beating out new lows handily, this indicator remains on a buy signal. We are looking for some strong buying and volume to end the week on the bullish side with a potential new high for the SPX 500.
Levels continue to be taken out with the SPX and Nasdaq showing higher highs, higher lows. Good support on the SPX at 5,600 would be in place with another close above that level. Nasdaq is climbing back towards 20K and is within striking distance. The Industrials are very close to highs again but this index is very overbought, so a failure here and pullback would not be a surprise.
The Internals
What’s it mean?
Nice rip higher by the indices and the markets, they snuck up on the bears as it appeared they bulls were left without much energy. That was not the case, look at those ticks, especially in the Nasdaq. buy programs all session long, good VOLD and ADD action along with the ADSPD. Put/calls are moving lower while the VIX peaked and fell sharply. We could see that VIX really melt end of week.
The Dynamite
Economic Data:
- Thursday:Jobless claims, SPX flash services/manufacturing existing home sales
- Friday:New home Sales, Chair Powell speech
Earnings this week:
- 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.
