The Fuse
Equity futures continue to roll higher as the bulls are not finished yet. Overnight we saw good strength in China and Europe, today is a big triple witching option expiration so we could see some volatility all day long.
Interest Rates are modestly higher on the long end of the curve. Of course, the 10 year plunged this week and now sits below 4%, the inversion of the yield curve is very steep now. The market is trying to force the Fed into rate cuts quickly. Bonds remain well bid.
Stocks maintained their strength yesterday with good price action and strong accumulation of shares. The Industrials are trying to make it three new highs in a row. Gold is up nicely, nearly .7% this am while crude oil is up about .8%. After a day to chew over the Fed decision, statement and comments the market is still believing rate cuts are coming, and soon.
Earnings from Costco last night were terrific, the company also announced a special $15 cash dividend to shareholders payable in January, that has kept the stock elevated here.
The stock market finished higher again, following through after yesterday’s strong advance. Today’s beneficiary was retail sales, which came in strong while jobless claims were lower once again. The bar is raised now for earnings expectations into 2024 but the stock market is all over it for now. We may have a strong finish over last 10 days of trading but then in January – who knows?.
Another stellar day of breadth for the indices has this indicator well into a buy signal and even overbought. Hard to believe it only took a couple of sessions, but certainly overflow from yesterday’s turnaround explains it.
Incredibly strong turnover yesterday as price continues to make new highs. That is the sign of a bull market, a no-holds barred approach as the buyers pile in and chase after stocks. Will this end well? We’re not judging, it might turn ugly but no matter – if the volume prints continue with strong price action, it’s up we go.
The SPX 500 moves a bit closer to the target, the all time highs at 4,818. it’s only 100 points away now and that seems appropriate to finish the year at that level. It’s just too ‘neat’ though, and frankly with the oscillators very overbought there could be a good pause before that happens.
What’s it mean?
Stocks continued running like banshees on Thursday, the internals really tell the story. The VOLD finished higher just like Wednesday spurted up all session long. The ADD finished a bit worse though as did ADSPD, but the TICKS show the action was solid all session long. See the monstrous green ticks in the NYSE. Put/calls were lower as call buyers were strong, while the VIX edged up slightly. Something to keep in mind that VIX is down sharply during this seasonally strong period but eventually protection buyers will step up.
The Dynamite
Economic Data:
- Friday: Empire Manufacturing Index, IP and cap utilization, S&P Global PMI
Earnings this week:
- 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.