The Fuse
After a dismal trading day Monday stocks are trying to rebound, futures are higher a bit this morning but it still feels tentative. I suppose that will be the cautious tone for the next week until the next Fed decision on Dec 10.
Interest Rates are slightly higher again this morning as worries about global inflation deter bond buyers from adding to positions. High yield spreads remain tight, 2/10 spread also tight and remains steady, fed funds futures seeing an. 85% chance of a cut.
Stocks are trying to mount a rolly and make it a ‘turnaround tuesday’. In Europe STOXX were flat but Germany higher by .3%. Stocks in Asia were mixed, Japan flat but Hong Kong up .2%, Shanghai fell .4%. Bund yields and US treasury yields up 1bp, the dollar was flat, gold down about 1%, silver off sharply down 1.4% in heavy trade, crude oil off a fraction.
Earnings last night from Credo and MongoDB were outstanding, these stocks ripping higher today and getting higher price targets on the street. Signet is falling a bit this morning thought on a revenue miss. Tonight we hear from Box, American Eagle Outfitters, Marvell, Crowdstrike and Pure Storage, tomorrow am Dollar Tree, Macy’s.
So much for December starting off strong! It was all negative all day long, probably mostly payback from a very strong week on poor turnover. That is what happens during a holiday week, some give back of ill-gotten gains. Now that Monday is over perhaps we’ll see if the early month money flows turn back into stocks, that is likely to hit equities later in the week, if not today.
Yesterday put an end to the five day positive breadth streak, we knew it would eventually happen. However, some buyers did come in midday but the markets faded anyway, oscillators turned down but are still on the positive side of the ledger. They were a bit overbought after the close on Friday, so a bit of digestion is not surprising. New highs still kicking butt over new lows.
Turnover was brisk, and with a down session on Wall Street that can only mean one thing — a day of distribution. But one day does not make a trend, and with some heavy dumping on Monday into an uptrending market it seems the selling could have been overdone, but we’ll wait to see how things go later in the week. We often see positive money flows to start a new month..
Admittedly the indices were a bit stretched from the 20 ma, so a Check back is not a surprise. No doubt the indices are going to ‘back n fill’ some to test the 20 ma and perhaps the 30 ma, but we have strong momentum into this month, once that overbought froth is repaired we might see those new highs eclipsed before Santa makes his run in three weeks.
The Internals
What’s it mean?
A miserable. day for the internals, VOLD was weak as was ADD, no relief all day long. Put/calls, which rose up on Friday came down a bit but are still elevated. Ticks were solid red on Monday, the VIX was up a bit but finished off highs of the day. ADSPD was weak and nearly a trend down day. Looking for a turnaround Tuesday.
The Dynamite
Economic Data:
- Tuesday:Bowman speaks, auto sales
- Wednesday:ADP, Import price index, services PMI, ISM services
- Thursday:Jobless claims, trade deficit, Bowman speaks
- Friday:PCE, income/spending, consumer sentiment, consumer credit
Earnings this week:
- Tuesday:SIG, UNFI, MRVL, CRWD, GTLB, PSTG, AEO, BOX, OKTA, ASAN, LESL
- Wednesday:DLTR, M, THOM RBC, CRM, SNOW, FIVE, GWRE, HQY, PVH, TLYS
- Thursday:KR, DG, HML, BBW, SAIC, TD, DCI, HOV, RBRK, DOCU, S, ULTA, HPE,
- Friday:VSCO, KNOT
Fed Watch:
Plenty of talk from the Fed recently and most of it has been dovish. Since NY Fed Chief Williams said he would be voting for a cut at the next meeting, the futures market has done an about face. We’ll hear from Chair Powell this week along with Miki Bowman, who is in the rate cut camp.
Stocks to Watch
Small Caps – What a resurgence of the ‘littles’ in the market. Their leadership is certainly important to keep the market trending higher.
Retail – Several retail names will report this week but more importantly is hearing how the consumer is doing the first weekend of holiday shopping. It seems records may be broken this year.
Rates – We always keep a close eye on rates but during this start of a new month if they head lower then we are likely to see continuation of the stock rally.
