The Fuse
Equity futures are catching a nice bid this morning after some trade announcements after the close yesterday. Two recipients are Apple and NVIDIA, where we found out the companies will be exempt from 100% tariffs (if they continue to build in the US). Expect to see others jumping in quickly with investmentss as they do not want to feel the wrath of higher prices.
Interest Rates are flat as can be as fixed income investors assess the landscape. 2 year yields fell sharply last week following the weak job report and have not risen, bond investors believing the economy may be slowing down a bit. High yield spreads remain tight, and fed futures reflect up to three cuts in 2025.
Stocks across the world were up modestly, over in Europe STOXX was higher by .2% led higher by France and Germany. Over in Britain the FTSE lost ground, down .3%. Gold is higher by about .7%, silver is ripping and crude is up modestly. The dollar index fell .2%. German 10 yr bund yields up 1bp, US 10 yr treasury yields higher by 2bps, and in Asia Japan climbed .6% while Chinese markets were nicely higher as well.
Earnings from Applovin last night were terrific but the stock was down afterhours, it makes little sense but let’s see how things go today. Duolingo put up a nice quarter, Fortinet did not nor did ELF. This morning we hear from Lilly, Vistra, ConocoPhilips, DataDog, Sony and Celsius Holdings. Tonight we get results from The Trade Desk, Pinterest, Twilio, Atlassian, and TakeTwo Interactive.
Terrific action for the bulls yesterday as it appears the uptrend may be back on the tracks. But let’s wait for a followthrough day before we pass judgment, there is always the chance the market gives it back. We’ve seen that happen the last several days, liquidity has been poor and the response to earnings has not been as expected. Maybe that changes end of week.
Surprisingly, breadth was negative yesterday. It probably was due to weakness in the small caps, which actually were down on the day. Rates were lower and the usually is positive for the IWM, but perhaps another day. Oscillators are still negative, the Nasdaq not as weak. Breadth was looking to shift to a buy signal but could not make it. New .
Turnover was weaker yesterday than Tuesday, as we see the markets climb on less volume that concerns us. Why is that? A lack of conviction by the big money players. It says something when the big money is pumping into stocks heavily, but razor thin volume is a red flag alert. We are not seeing that just yet but certainly would like to see bigger numbers.
Was that it? Maybe not, but perhaps that testing of lower levels Tuesday can be considered a support zone. As always, some followthrough would be nice, and a kick to the small caps to push higher would satiate the bullish cause. We still like the pattern of higher highs, higher lows and that will carry on until there is a much more severe breakdown. For now, dips are being bought.
The Internals
What’s it mean?
We’ll grade this action a B- for yesterday. Breadth being horrible relatively speaking, the VOLD barely budged from the prior day, same for the ADD. VIX though was the star of the day, falling under 17% as this indicator gets back on track. Check out the TICKS, super strong as many buy programs hit throughout the session. Impressive. Put/calls remain stable. A decent day for the bulls with good price action. Nothing more.
The Dynamite
Economic Data:
- Thursday:jobless claims, productivity, unit labor costs, inventories, consumer credit, Bostic speaks
- Friday:n/a
Earnings this week:
- 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.
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