The Fuse
Equity futures are mildly lower on this first trading day of July, the first day of the 3rd quarter. We often see this day as a positive one, something like 70% of the time the first trading day of July is green. We’ll see how it goes as the markets are overbought in the short term.
Interest Rates continue to fall slowly with bonds catching a nice bid. Fixed income has started to look very interesting of late as bond buyers bring yields down, trying to pressure the Fed into cutting rates. High yield remains very strong, spreads are tight and fed futures are still looking for about 3.5 rate cuts in 2025.
Stock futures are down but in Europe they inched higher, the STOXX up .1% but the FTSE in London higher by .3%. The dollar index fell .1%, gold is higher by nearly 2%, silver is exploding while crude oil gains some lost ground. German 10 yr bund yields fell 4 bps, US 10 yr treasury yields off 2bps, in Asia Japan wa off 1.2%, Shanghai up .4%, Hong Kong was closed.
Earnings are sparse this week as we turn the page on the quarter and get prepared for the next earnings season.
What a month for the markets! It certainly was set up early on for some disappointment but the dip buyers and strong handed bulls came through. The stock market is resilient, there is no question about that. But how much of this rally is pricing in good economic performance? That is always the concern as many who missed out start coming back in, late for the party.
On this last trading day of the month/quarter just mediocre breadth. Could be the bulls are getting tired, but the oscillators did pick up a bit end of day. That means the bulls continue to hold the advantage. New highs again beat new lows, but not buy enough to spur a buy signal, but very close to it.
Heavy volume print end of day as one would expect with end of month/quarter. Big volume spurred on by options expiration, which may help give us a read on the rest of the month. July 1st (today) is often a very positive day in the markets, we’ll see if history is our guide. Given the chance of lower turnover this week and low volatility I’m not going to hold my breadth.
Until there is a good-sized pullback the support levels remain much lower, save for the small cap stocks. That group just leaped and confirmed over the 200 day moving average, which is a milestone. If rates continue lower we may finally see a bit of outperformance from the Russell 2K. Rebalancing this past week happened so that might also spur more buying.
The Internals
What’s it mean?
Actually some strong internal signals Monday, take a look at the VOLD and TICKS, which showed bullish volume and heavy buy programs all session long. We’ll see if that continues to the end of the week. VIX fell hard again, the ADD and ADSPD were a bit disappointing though, the put/call sunk as well and remains on a buy signal.
The Dynamite
Economic Data:
- Tuesday:SPX PMI, construction spending, JOLTS, ISM manufacturing
- Wednesday:ADP employment
- Thursday: NFP report for June, jobless claims, services PMI, factory orders, ISM services
- Friday:N/A
Earnings this week:
- Tuesday:MSM, STZ, GBX
- Wednesday:UNF, FC, ZENV
- Thursday:N/A
- Friday:N/A
Fed Watch:
Not much on the Fed’s calendar for speakers this week but I’m sure they will be watching the data closely. Recent comments from Governors has them leaning towards a more loosening policy, but according to Chair Powell more data needs to be analyzed. Last week on Capital Hill he did acknowledge inflation is moving in the right direction (down) but needs to continue the process.
Stocks to Watch
NVIDIA – The big semiconductor stock closed at an all-time high last week and helped to bring up others in the group. If this momentum continues then the Nasdaq will drive up other names, too.
Coinbase – This stock really pushed higher this past week and was the best performer in the SPX 500. COIN has strong ties to crypto and bitcoin, which is trying to break out from a recent range.
Volatility – Having fallen sharply over the last few weeks the VIX finds itself at levels last seen in February, just before a hailstorm of volatility hit the markets. In front of a holiday however we often see VIX fall or at least stay down, that is likely to be the case this week.
