The Fuse
Equity futures are mixed with the industrials modestly higher while other indices are soft. Traders will be positioning themselves for a post-Fed announcement which could bring some volatility. Taking positions on both sides could be the right move with some two-way action expected.
Interest Rates are moving this morning as fixed income markets are adjusting to some selling in overseas markets last night.
Macy’s received a buyout bid yesterday from an investor group, that has retail stocks perking up this morning.
Oracle will release earnings later tonight, the stock has been weak recently which is likely a hesitation following a poor quarter announced in September. Tuesday am we’ll hear from Johnson Controls. Last week’s earnings were pretty strong with LULU up sharply. Friday’s strong jobs report was filled with good things and helped spur a strong rally to finish the week near it’s highs. This report will be in hand later this week when the Fed meets, along with the inflation reports starting tomorrow.
It’s all about the Fed this week with their last meeting of the year, a two-day affair with a press conference to follow and economic projections as well. The committee is likely to not change policy this week but may cite some encouraging signs on the inflation front. The yen lost ground after a new report stated the country may not scrap its negative rate policy after all. The yen rallied last week on that report. CPI and PPI will be released over the coming days in the US, looking for very low numbers. Oil fell about 1% in early trading. Bitcoin has a volatile overnight sessions, falling more than 7% before stabilizing.
Positive breadth but barely on Friday as this indicator clings to a buy signal (barely). We may have bit more resolution following the inflation reports and Fed meeting this week. Heavy skew towards positive breadth means the market may continue forward.
Volume trends have been trending bullish. Friday was another accumulation day for the SPX 500, others had strong turnover but not quite better than Thursday. That doesn’t mean much as markets were higher on the session, but we’ll see more volume accelerate this week as Friday is a big options expiration day.
The SPX 500 finally finished above the 4,600 level for the first time in months. We need some confirmation though, and that would require another day above there. For support we still see 4,450 and 4,500 as levels where the markets could travel and bounce from.
The Internals
What’s it mean?
Pretty nice. day for the internals as the VOLD expanded out to close near highs of the session. We also saw good strength in both ticks and the bullish volume pushed the TRIN down to dangerously low levels. The VIX also is low at 12.4%, but we are in a seasonally bullish time and apparently there is not much demand for protection. With the news hitting this week we want to pay close attention to these internals.
The Dynamite
Economic Data:
- Monday: N/A
- Tuesday: Small Business Optimism, CPI, treasury budget
- Wednesday: PPI, mortgage apps, FOMC decision/press conference
- Thursday: Jobless claims, retail sales, biz inventories, import/ex prices
- Friday: Empire Manufacturing Index, IP and cap utilization, S&P Global PMI
Earnings this week:
- Monday: FCEL, CASY, ORCL
- Tuesday: JCI
- Wednesday: REVG, ADBE, NDSN
- Thursday: COST, LEN, REGN
- Friday: DRI
Fed Watch:
It’s the last Federal Reserve meeting of the year and markets are not expecting rates to move at all. We will have some projection materials this week from the committee along with another press conference from Chair Powell. In all likelihood the committee will be far more reserved than what the market wants, and that could be considered a disappointment. Look for quite a bit of volatility before and after the meeting.
Stocks to Watch
Federal Reserve – This is the last meeting of 2023 and the hope is the committee is more likely to end rate hikes in 2024. No hike or cut is expected this week.
Interest Rates – They say the bond market has been doing the Fed’s job. Yet, the market is now pricing in five 1/4 point rate cuts in 2024. They may be way ahead of themselves and the Chairman may throw some cold water their way.
Retailers – We are only a couple of weeks from the Christmas holiday and shoppers remain active. But as the time gets near supplies run short and stock (inventory) is hard to come by. So far it seems to be a solid shopping season.