The Fuse
Stock futures are taking a turn downward following Monday’s strong outcome. We were not all that impressed with the Monday rally though Dow Industrial stocks led the way. Troubling data continues to tell us the market may be ahead of itself here.
Interest Rates climbed yesterday but are retreating a bit on the long end today as a risk off day is upon us. Still, the 10 yr is stubbbornly staying above 4%.
Positive news from Novo Nordisk about their weight loss drug has other companies like Lilly pushing higher (earnings, too). Overnight, economic data from China was atrocious, putting in jeopardy their big re-opening gains. China stocks are sharply lower. Moody’s lowered the rating in 10 bank stocks and may do more in the near future.
Strong earnings from Lilly this morning is being countered by poor guidance by Datadog and UPS. If this continues to be the theme this month stocks are going to continue being sold following the news.
A solid comeback for the indices following a few days of intense selling. The SPX 500 finds itself now back above 4,500 again with its sights set on the all time highs, about 8% higher.
Better breadth yesterday but not the sort of rout you would expect with the indices climbing 1% or more. The industrials led the way while the SPX 500 pushed higher with pretty strong breadth numbers. The oscillators are still oversold and if they charge over zero then it’s game on for the bulls.
Volume was elevated again and we see another day of distribution. Buyers came in early but the selling was strong and intense later in the day, no stopping the bears at all.
Some easy numbers to see for support on the SPX 500: 4439 is a gap fill, strong support at 4,400 and then below at 4,330. If that level breaks the chart turns quite bearish.
The Internals
What’s it mean?
Monday was strong but was it really? The VOLD was weaker most of the day but made a big move up late in the day as a slew of buy orders hit the tape. VIX went lower and ticks were concentrated green, but look at put/calls, which rose sharply. That’s a red flag alert.
The Dynamite
Economic Data:
- Tuesday: Small Biz Optimism, Trade Balance, Wholesale Inventories
- Wednesday: Crude Inventories, China CPI
- Thursday: CPI, Jobless Claims, Japan PPI
- Friday: PPI, Michigan sentiment
Earnings this week:
- Tuesday: IFF, LCID, PLTR, PARA, SWKS, VECO, ADT, DDOG, LLY, QSR, UAA, UPS, AKAM, AXON, BROS, LYFT, TTWO, WYNN, ZIP
- Wednesday: CAVA, JACK, RBLX, WEN, ALRM, TTD, DIS
- Thursday: CYBR, DDS, HBI, RL, INDI
- Friday: SPB
Fed Watch:
The fed futures continue portray a higher chance of rate hikes coming later in the year. Of course, only three meetings left and with the Jackson Hole conference coming up there could be some fireworks. Last week’s data on productivity was positive, first strong number in years. That is going to help make decisions easier for the Fed, even as expectations for higher inflation this summer make it hard to pass on a rate hike. We’ll have some speakers out this week.
Stocks/Issues to Watch this Week
Interest rates – A huge pop this week has started to flatten the yield curve, which could be bearish for markets. If yields retreat then stocks may become attractive.
VIX – A spike in the volatility index this week surprised everyone, and markets fell sharply. This indicator could see a move up to 20% before it’s all over.
Disney – Earnings this week from the ‘house of mouse’, the stock has been a huge disappointment for months. I don’t expect any relief here but the stock is probably done going down.