The Fuse
As the trading day has started futures are weak, reflecting the poor economic data released. Jobs report came out weak for October but stronger for November, but not enough to get the fed off ‘pause’ mode.
Interest Rates are down slightly as some of the data was friendly to bonds. Perhaps a slowdown is coming for the economy, which means money out of stocks and into fixed income. High yield is starting to look a bit toppy, fed funds to see the next cut likely in April.
Stocks in Europe fell .2% (STOXX), led down by larger declines in Germany. US dollar was flat, gold is slightly higher, silver a bit down and crude oil getting slammed, down 3%. Asian markets were lower, Japan off another 1.6%, Hong Kong down 1.5% and Shanghai down 1.1%. Bund yields and US 10 yr treasury yields both down 1bp.
Earnings are thin this week but some big names report. We’ll hear from Nike, FedEx, Accenture, Darden, Micron, Jabil and Carnival. These may move markets.
In the early going it appeared markets were ready to bring it back to the positive side after Friday’s pasting, but it was not to be on this cold Monday in December. Stocks were up early but faded hard all day long as many traders decided the big tech names were going to continue downward. That was the case with Broadcom and Oracle, a couple of recent earnings movers that disappointed investors greatly. Still, there is a chance for more volatility and that means big swings up and down.
breadth was totally flat on the day but we won’t call that tie or even a win, the breadth was strong early but deteriorated all session long. Oscillators are separated again with the Nasdaq negative and the NYSE positive. That does not inspire much confidence though, new highs are still creaming new lows but the difference is getting narrower. No question the bulls have some challenges here but if they can address the poor breadth it might go far and bring a late year rally.
Markets were down on lower volume, that is the only positive thing we can say about the turnover. Friday’s session was heavy volume and smacked of institutional selling, but that did not hit on Monday. However, sellers were quite busy after the opening bell, not much of a bid in the market all day long as the internals show below there was a bear in the room.
Futures and the SPX 500 index fell hard early in the day but did manage to recover some, yet the bulls were left with an empty feel. Same for the bears too, which could not push the markets lower. Instead a 1% range as the VIX mostly predicted (16% vix). There are still several lower levels that can be tested before year end, and if so that might throw a wrinkle in the bulls’ plans for a Santa rally.
The Internals
What’s it mean?
Nothing good to say about the internals except the put/call raced lower, meaning some heavy buy programs late on ES futures. Yet, the VOLD finished much lower and the ADD well off its highs, the VIX ripped higher early but finished with a modest gain. TICKS were heavy red especially later in the session, sell programs persist..
The Dynamite
Economic Data:
- Monday:Empire State manufacturing, home builder confidence, fed speak
- Tuesday:Nov NFP, wages, retail sales, flash PMI, biz inventories
- Wednesday:Fedspeak
- Thursday:Jobless claims, CPI, Philly fed index
- Friday:Existing home sales, consumer sentiment
Earnings this week:
- Monday:ABVX, NAVN
- Tuesday:DLTH, OGI, LEN, WOR
- Wednesday:JBL, GIS, ABM, TTC, VERU, SPIR, NMTC, MU, WS, EPAC, MLKN
- Thursday:ACN, FDS, DRI, KMX, CTAS, FCEL, BIRK, ISSC, NKE, FDX, KBH, BB, AVO, SCHL, HEI
- Friday:CCL, CAG, LW, PAYX, WGO
Fed Watch:
Well the Fed did their thing last week and cut rates one more time, bringing the funds rate to 3.5%. That is still a bit restrictive policy but Chair Powell indicated that may be the last cut for awhile. The projections indicate one cut in 26 and one in 27, which may be pulled up. so that means a 3% rate by beginning of 2027, which may be the right policy figure. Lots of fedspeak this week before the holiday takes hold.
Stocks to Watch
AI – Much angst at the end of the week over some worries on the growth path of AI. Too much spending? Too much capacity? Even the dot.com days of 2000 when overbuilding happened seems to weigh on everyone’s minds. Expect some resolution soon.
Financials – Banks had a strong week as rates were lowered, this will help businesses grow and along with it bank loans. JPM was beaten down but came back in a huge way end of week. Looking for some continuation into the end of the year.
Volatility – The VIX is curiously low here with quite a bit of uncertainty, but perhaps it will just stay low until year end. We often see that happen but with recent saber rattling about rates, employment and inflation we could see more traders taking protection.
[thrive_leads id=’60674′]
