The Fuse
Equity futures are modestly higher this morning following a massive surge Monday. That session nearly wiped out all the losses from a poor Friday. The new month often brings strong money flows and that is what we saw yesterday. Can the bulls followthrough? Some good earnings reports out today might do the trick.
Interest Rates are slightly higher this morning but no question the trend in rates has shifted downward. The 10 yr is now pushed to 4.2%, the lower limit of a rather wide range over the past few months. There is a series of lower highs in the chart too, so if that continues we could see the long end of the curve move towards 4%. High yield hit new highs with the strong stock market, Fed futures now predicting with confidence three rate cuts coming in 2025.
With a nice jump in the stock market Monday it urged buyers overseas to get in. We saw a strong move in Europe, the STOXX higher by .4% led by good gains in Germany and France. The FTSE added .3%, the dollar index climbed .1%. Gold was down modestly, silver rallying while crude oil continues to bleed, off .5%. German 10 yr bund yields were flat, 10 yr treasury yields up 2bps, in Asia stocks were higher as Japan bumped up .6%, Hong Kong the same and Shanghai a robust 1%.
Earnings last night from Palantir were very strong and they raised guidance as well. Axon Enterprise did the same, beating the forecast by a mile. HIMS missed on the bottom line and Mercado Libre also with weak results and guidance. This morning we hear from Pfizer, Caterpillar, Eaton, Dupont, Marriott and BP. Later tonight AMD, Supermicro, Snap, Upstart, Astera Labs, Arista Networks.
What a turnaround day! Just about everything lost Friday was re-gained yesterday and with some good statistics along with it. Solid internals (below) and good response to earnings was the topic of the day. There is no disputing this market is in a bull run but we need to be mindful of any slipups, which can occur at anytime. Liquidity is good so far but when it weakens to may get in the way of this rally.
Superb breadth all day long as the bulls won the day convincingly. No question about it, new highs also started to advance over new lows and that is a change of recent character. Oscillators, deep in negative territory turned into mildly bearish now. Another day of positive energy and these will be moving to the bullish side of the ledger. Statistics were tilted bullish all session, better than 5-1 positive, which is a good start if the bulls want to push another run higher.
It wasn’t all great news, the volume trends were quite a bit lower than Friday. That is not a disaster though, as we often see these turnaround days with skeptical traders abound. There is nothing wrong with good volume that starts to carry on in the days ahead. We had higher turnover Friday, and who wants to jump in with both feet not knowing if that day was going to repeat.
Testing the 20 ma for the QQQ and SPY was just what the doctor ordered, but also the 50 day ma for the IWM and DIA. Those levels held firm on the indices and with some followthrough tomorrow we can feel confident these levels will hold. If volume rises then it increases our conviction. New highs from SPX 500 and Nasdaq could be sought after this week.
The Internals
What’s it mean?
A mirror image of Friday, what a strong day for the bulls. Heavy buying all session long, the VOLD and ADD stick out as start performers for our internals. Ticks were impressive, buy programs all day long with green all over the place. Put/calls are still a bit elevated, but VIX fell sharply and looks to continue its decline into the week. Very bullish day, followthrough always the key.
The Dynamite
Economic Data:
- Tuesday:trade deficit, services PMI, ISM services
- Wednesday:Fedspeak
- Thursday:jobless claims, productivity, unit labor costs, inventories, consumer credit, Bostic speaks
- Friday:n/a
Earnings this week:
- Tuesday:PFE, CAT, BP, DUK LMND DD, ESPR, ETN, MAR, AMD, SMCI, ANET, ALAB, OPEN, SNAP, LCID, UPST, RIVN, CLOV
- Wednesday:UBER, SHOP, OSCR, NVO, DIS, FUN, DAVE, MCD, APP, IONQ, SYM, DUOL, FTNT, ET ELF, DKNG, JACK, JOBY
- Thursday:CELH, QBTS, COP, LLY, HUT, VST, SONY, TTD, RKLB, SOUN, SMR, KTOS, XYZ, PINS, TEAM, TTOW, TWLO
- Friday:FUBO, TEM, WULF, FET, WEN, PAR, PMFS, SLVM
Fed Watch:
So, as expected the committee last week decided to leave rates unchanged. There was a difference however, with two Governors dissenting (first time since 1993). They both wanted to cut rates this time around, but the market was not expecting the move. If it happened that might have signaled the Fed sees something we don’t see – weakness. That might have been covered in the labor report which showed many revisions downward. That makes September the likely place for the next rate cut, now 90% probability.
Stocks to Watch
Disney – The company is all about the consumer and when they report this week we’ll have a good snapshot of how the spending is going. The transition Bob Iger talked about last year is nearly complete, we’ll see if they have some new things to uncover.
Volatility – The VIX really moved on Friday, pushing higher as the market shed some pounds. Finishing above 20% is not bullish but with less news to impact stocks that could fall sharply in the coming days and with it comes a market rally.
Gold and Bonds – The yellow metal had a banner day Friday but so did bonds, yields on the long end of the curve fell sharply as it is now assumed the economy may be shifting gears downward. Gold is less than 3% off all time highs as the weakness in the dollar continues. Bonds have been on the move lately, we’ll be watching this trend as it unfolds.
