The Fuse
Stocks firmed up today following a rather positive jobs report that once again showed the economy remains strong leading into the third quarter.
Interest Rates on the long end took a nosedive and are threatening to break 4% on the downside. That move will stoke more demand for stocks.
A very solid jobs report for July was released this morning, but with higher wages which might sour the mood at the Fed.
Solid earnings this am from CBOE and Amazon/Amgen last night are helping to push markets higher, but still below resistance.
After the big earnings are out of the way it is time for the July jobs report. The ADP came out Wednesday with a robust report, consensus is for 200K on the headline number.
Breadth was poor again Thursday in a spillover from Wednesday but closed well off the worst readings of the day.
After three moderately down sessions we’ll see if Friday turns the tide back around.
Volume quite a bit lower than the prior day so while markets were down it was not an official distribution day.
Yet, the trend may be turning down unless volume picks up and the markets turn the corner and finish higher. It would be hard to imagine a short three day correction is all we have, but that is possible.
Support levels are down at 4440 (gap fill) and then 4400, followed by 4330 on the SPX 500. Nasdaq still has strong support at 15K, but if markets finish strong today we could up that support level a bit. The key here is watching the Russell 2K, which tends to lead markets up/down.
The Internals
What’s it mean?
Thursday had the feel of a continuation of Wednesday’s drag lower, but it felt the selling was ‘finished up’ at the lows. We’ll have to see if that indeed happens, following strong earnings from Amazon and if the market feels good about the jobs report. We see very little difference in ticks from yesterday, VIX headed lower and the ADD was also weak. This could be the turning point for the markets and a positive close on Friday would be impressive.
The Dynamite
Economic Data:
- Friday: non-farm payroll report
Earnings this week:
- Friday:AMC, CBOE, PRLB
Fed Watch:
Last week’s Fed meeting seemed ho-hum to many but to use there was a message sent, and that was the committee was trying to pivot slowly, out loud. Of course, nobody heard it that way to feel confident about that call, but we believe the Fed may consider a pause or a hike over the next few meetings. Any hike that does come is likely to be the last one. We’ll have some speakers out this week talking about the economy. While inflation remains too high for their liking, they are still very pleased to see prices starting to come down due to their efforts.
Issues/Stocks to Watch
Apple – the largest company in the world will report earnings this week, the stock has added more than 1 trillion dollars in value this year. We don’t expect a disappointment but rather news about upcoming products and production concerns.
Jobs – Friday’s big employment report will give us a glimpse of how the economy has started off in the second half of 2023. So far so good and if productivity is strong the day before, the Fed will be very pleased with their hawkish campaign.
Interest Rates – Last week saw rates climb above 4% on the 10 year for a brief moment, enough to scare stock investors. We’ll be watching for more ‘scaring’ this week, if it materializes.