The Fuse
Equity futures are pushing lower again as the seasonal bearish trends take hold, and some profit-taking hits the market. Overall, this seems to be a modest pullback within a bigger uptrend. Earnings are in focus, November PPI out today but also a SCOTUS decision on tariffs may be issued later in the day.
Interest Rates are moving lower as fixed income investors come in to buy bonds ahead of economic data. High yield remains strong, spreads are tight. The 2 year yield at 3.55% and in a downtrend but it appears to be rising again. Fed futures now pricing in the next rate cut into June.
Stocks in Europe were modestly lower, STOXX off a bit as was FTSE, down about .1%. Gold is ripping higher again as is silver, perhaps worry over what is happening in Iran and maybe an adverse reaction to a tariff decision by the SCOTUS. Crude oil continues to rise, up near 61.70 per barrel. Yields are down modestly, Hong Kong was up nicely, higher by .6% while the Nikkei in Japan a robust 1.5%.
Earnings coming out this morning from BAC were very strong across the board, also Wells Fargo but a slight miss in the NII, that stock still looks strong. Later we get Citi, one of our favorite names. Tomorrow am we hear from GS, MS, BLK and TSM.
Stocks took a dip yesterday, but more on a lack of news rather than something tangible. The markets had been rising nicely but hit its head on the ceiling, one established last week with the great relative performance. It’s a busy news day here (see below) with data and fed speakers along with some big bank earnings. JPM was good but not good enough, will the others follow down that path?
Another modestly positive day of breadth, so on a down day that might be considered a win for the bulls. Yet, there is this feeling of lost hope when the market falls as it did yesterday, the Industrials losing nearly 1% on heavy volume. Oscillators though remain positive, and as we move through a corrective phase the bulls may decide this one is just a sideways correction.
A dpwn session but mixed results on the volume prints. Seems even as the industrials were the worst performer of the day it was not a day of distribution, but the IWM barely dipped but on higher turnover, technically a distribution day. Same for the Nasdaq and SPX 500, so we need to see if there are more coming. Remember, a single distribution day is not critical, but if they start to cluster then there is trouble brewing.
We talked about the potential for a pullback recently, and with the action on Tuesday it sets up for more downside IF earnings and data are poor. We saw a bad response to JPM earnings yesterday, a huge outside day to the downside. That may be an isolated case, but no question with volatility low the market is complacent, and during a seasonally weak period. Fortunately, a holiday is upon us as we often see a drop in VIX. If the bulls can withstand another whack or two there could be upside coming. Good support at the 10 ma.
The Internals
What’s it mean?
Another interesting day for the internals, the VOLD finished slightly lower the ADD and ADSPD right at zero. VIX climbed but did manage to close off those highs end of day, TRIn rose up but so did the put/calls, telling us it looks like big money is starting to get nervous and buying some insurance. Ticks were heavy red most of the day, save for NYSE which was pretty heavily green (thanks to good RS in IWM). Today should be interesting.
The Dynamite
Economic Data:
- Wednesday:retail sales, ppi, biz inventories, home sales, beige book, lots of fed speak
- Thursday:jobless claims, empire state, philly fed, fed speak
- Friday:industrial production, cap utilization, Barkin and Jefferson speak
Earnings this week:
- Wednesday:WFC, C, BAC, INFY, HBF RFIL, HOMD
- Thursday:TSM, MS, GS, BLK, BSVN, JBHT
- Friday:RF, STT, PNC, MTB
Fed Watch:
This is an important week for the fed, not for decision making but because so many speakers are out talking about fed policy and the economy. Seems the only one NOT talking is Chair Powell, but with so much division at the time it seems relevant to listen to every participant’s view and where they stand. The first meeting with some new voting members is end of the month.
Stocks to Watch
Silver and Gold – Again, the metals are on fire and pushed to highs last week. Seems the momentum is strong here and that could last for some time, pullbacks have been buying opportunities.
Crude oil – Since last week’s invasion of Venezuela the price of crude only rose up modestly. That should change soon, futures market sees higher prices soon and with any supply disruption that will happen quickly.
Banks/Financials – Kicking off earnings season are the big banks this week. Did they run too far? It’s possible, but earnings should be fantastic anyway.
