The Fuse
Futures are rallying modestly higher this morning as the recovery from yesterday’s early drop continues.
Interest Rates are steady this morning but we expect them to start moving after the release of important inflation data later in the week.
Moody’s downgraded several banks Tuesday and that caused a ripple effect on the markets, yet breadth was only 18-10 negative and well off the worst levels of the day. Oil continues to rise up as energy names are strong.
Yesterday UPS cut its forecast for the rest of 2023 due to weaker demand and higher wages. Upstart came in line with earnings but is getting smashed today, Lilly gave out a superb report as did Celsius Holdings and Axon Enterprises. Today brings the Trade Desk and Disney along with Wynn.
One day giveth, one day taketh away. Markets are in consolidation mode here but with a bias to the downside. Yet, each time it appears the indices are going to take a turn for the worse, there is a ‘stick save’. Finishing near the highs of the day (though down) is a moral victory.
Breadth turned lower after a one day respite. That fact buyers are not stepping up even as the markets correct modestly is concerning for the bullish traders.
Volume trends were weaker on the day which is what the bulls like to see. Stocks fell sharply at the open on some swelling volume but rallied nicely towards the end of the day. We may see bigger volume prints at the end of this week.
SPX 500 closed just under 4,500 yesterday and it appears that level will be breached again today. Strong support at 4439 (gap) and then at 4,400 and below there 4,330.
The Internals
What’s it mean?
Quite the turnaround as the markets responded negatively to weak economic data overseas. Yet, markets did recover from the dead lows to finish near highs of the day, and as it appeared the gains from Monday would disappear, it turned out to be minimal damage. The VOLD was weak all day long but did rally back, but look at the move in the ADD, a strong turn higher while TICKS were positive. VIX fell from its peak but the put/call ratio remains very active, it’s on a sell signal.
The Dynamite
Economic Data:
- Wednesday: Crude Inventories, China CPI
- Thursday: CPI, Jobless Claims, Japan PPI
- Friday: PPI, Michigan sentiment
Earnings this week:
- Wednesday: CAVA, JACK, RBLX, WEN, ALRM, TTD, DIS
- Thursday: CYBR, DDS, HBI, RL, INDI
- Friday: SPB
Fed Watch:
We heard from Fed Governor Bowman this week who said rate hikes need to continue, and then Philadelphia Fed President Harker said maybe hikes are done. It’s hard to know who to believe, and of course the next meeting will be one where these different views are highlighted.
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.