The Fuse
Equity futures are rallying this morning as traders try to close out the week on a positive note. Volatility remains muted and it seems market players are becoming a bit complacent. That could be a problem next week as the uncertainty rises over monetary policy speculation.
Interest Rates are slightly higher again as bond traders sell down some fixed income. It appears to be a bit of trimming, though we’ll have a big inflation report today in the PCE. Tight spreads in high yield continue, while fed futures now see a 90% chance of a cut next week. Continued strength in metals as well.
Stocks rose slightly overnight in Europe, gaining .2% on the STOXX, led by France and Germany again. FTSE also added .2%, gold is higher and silver up better than 1.5% in volatile trading. The dollar fell .2%. Japan declined 1.1% but in China the Shanghai index rose .7% and Hong Kong up .6%. Yields in Germany and US 10 YR rose 1bp.
Earnings last night from Ulta Beauty were strong and they raised guidance as well. Rubrik also hit the street with solid numbers, DocuSign beat but offered soft guidance. This morning strong numbers from Victoria’s Secret.
A mixed session for the indices as the SPX 500 and Russell 2K were on the winning end while Nasdaq 100 and the Industrials were notable slackers. No question where the power was on Thursday, it was with small cap names all day long. The IWM rose up nearly 1% on strong turnover again as these investors are seeing daylight next week if the Fed does indeed cut rates and indicates more are on the way. Data showed today that inflation was still hot but the economy is chugging right along.
Breadth wasn’t great though it did start out positively, there is just too much pressure to push stocks upward. We may see a bit of ‘back n’ fill soon, that would clear out some of the froth and allow the dip buyers to get yet one more chance to add stocks. Oscillators remain slightly overbought, new highs still hammering new lows.
If you’re following the A/D of the volume then you’ll know that accumulation on the SPY and IWM was bullish and that even as the QQQ and DIA were down it was on lighter volume. That’s the combination you want to see.
Day after day it seems the markets drift lower, get yanked down to an interim support level and then bounces fierce to hammer some short sellers. At some point, maybe later in the month we’ll have some real testing of levels that may show where the support lies, much like the recent test of the 100 ma.
The Internals
What’s it mean?
After yesterday’s strong internals it would have been difficult for the bulls to pull off another big win, so we ended up with a mixed picture. That’s fine, perhaps we’ll get more action here today. VOLD was strong but not like yesterday, VIX was active but ended down by the close, ADD and ADSPD right near the flat line. Pretty well even on the ticks, buy and sell programs equal on the NASDAQ. Put/calls took a dive and is now below a key .65 level.
The Dynamite
Economic Data:
- Friday:PCE, income/spending, consumer sentiment, consumer credit
Earnings this week:
- 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.
