The Fuse
Equity futures are bouncing back this morning as there is a nice bid underneath the market. We have not seen that happen at all this week, perhaps buyers were lying in wait for their moment. Earnings have been pretty decent across the board but guidance has mostly been weaker.
Interest Rates are bumping up modestly again as the market makes adjustments to the Fed’s preferred path of interest rate policy. The bond market is worried about ‘higher for longer’ lasting through 2024.
Stocks seem to be treading water early in the week but there is plenty of liquidity to drive them higher. Not much in the way of economic data to take the market off course. Oil ils higher this morning by nearly .8% as supply numbers are released later in the day. Gold is down slightly. Four Fed speakers are out today talking about the economy and inflation.
Earnings were strong last night from Fortinet and ELF along with Ford and Chipotle. Not so good for SNAP which is getting snapped down nearly in half. Amgen was solid as well. Today we heard from Alibaba with mixed results and very strong numbers from Uber. CVS posted better than expected earnings but cut full year guidance.
A modest victory for the bulls as we had see saw action all day long but the bulls did end up victorious. A pretty strong day and rebound for the Russell 2K, which spawned better statistics (see below). We have some big earnings later in the week but a lighter week of economic data. More attention is being paid to interest rates.
Finally some good breadth, again thanks to the skew from the small caps. The Russell 2K has quite a strong influence on breadth recently and that seems to be pushing markets around. We still have breadth on a sell signal here, the oscillators are also negative, which may seem surprising.
We were looking for a strong day of turnover but we did not have it, sadly that means today’s strong day does not count as an accumulation day. That’s fine, as it appears Monday’s low may be firm. If that holds another higher low is in place and stocks may take another leg up.
Hitting milestones is becoming difficult these days. It seems one step forward, one step back as stocks tend to push/pull and if that continues to happen a surprise selloff could be a very real problem. However, support is still in place at 4,900 on the SPX 500 and just below at 4,850 where the 20 day moving average is located.
What’s it mean?
Finally a strong day for the bulls, it’s been a few days since we saw the bulls take the baton and run with it. Internals where in there favor all day, with a sharp rise all session in the VOLD and ADD while VIX headed lower along with put/call ratio. TICKS were strong all day on both Nasdaq and Nyse, a a good sign for the rest of the week.
The Dynamite
Economic Data:
- Wednesday: Mortgage apps, crude oil inventories, consumer credit
- Thursday:jobless claims, WASDE
- Friday:
Earnings this week:
- Wednesday:BABA, CVS, HLT, SLAB, YUM, XPO, ARM, COTY, PYPL, DIS
- Thursday:WMS, CYBR, HSY, K, MAS, RL, SWI, AFRM, NET, SYNA TTWO, TEX
- Friday:AMC, ROAD, PEP, SXT
Fed Watch:
Nothing much this week but Chair Powell is interviewed on 60 Minutes for Sunday evening. This past week saw the committee stand pat on monetary policy but they are contemplating the right timing for rate cuts. That is likely to come this year but not as soon as the market would like. The data shows inflation is still too high and the economy is running strong. Not an environment that needs rate cuts.
Stocks to Watch
Volatility – The VIX remains low under 14%, a dangerous level as a pop in volatility can occur at anytime, unexpected. You might recall some years ago just after Chair Powell took over there was a massive move higher in volatility, it was the month of February. Something to watch for.
Earnings – A deluge of earnings this week as we get a sampling across several areas including retail, industrial, technology, healthcare and entertainment. Disney, McDonalds, Lilly and Pepsi will be in focus.
Interest Rates – Following Friday’s huge labor report which showed more than 330K jobs created, interest rates popped higher as the market starts to price in fewer rate cuts down the road, as this was telegraphed Wednesday by Fed Chair Powell.