The Fuse
Equity futures are strong this morning after the weekend particularly positive action from small cap IWM stocks. This index was on fire last week and continues upward, pulling the other indices along with it. Perhaps last Thursday’s move was a short-covering move, but that often starts a rally.
Interest Rates are on the rise today, the long end of the curve down a bit as the curve steepens. Fed futures continue to improve and point towards more rate cuts than the Fed is forecasting. Markets are now leaning toward three cuts in 2023.
Stocks in Europe fell overnight, down roughly .4% as some big names overseas were weak. Crude oil is mostly unchanged as is gold and silver, German 10 year bunds are down 2 bps. Stocks China were mixed, Hong Kong down 1.8%. Starting the second half of July markets are very strong with robust action from the small cap names, buoyed by lower rates and the hope of Fed easing coming sooner rather than later.
Earnings were out this morning from Blackrock and they were very strong and beat top/bottom line and guided up. Goldman Sachs is reporting earnings this morning as well.
An assassination attempt on former President Trump was the big event over the weekend, many watched with concern over what transpired. With little worry in the markets up to now we have a whole new level of uncertainty to deal with. Amazon prime day starts tomorrow which can be a pretty strong indicator of consumer health.
More gobs of breadth on Friday followed the strong internals from Thursday. Followthrough is important especially on a Friday when many choose to wait for the Monday open to get involved. Oscillators are now wildly bullish and the Russell is leading the charge. New highs expanded strongly for NYSE and Nasdaq putting this indicator on a buy signal.
Very heavy turnover on the Industrials as that index pushed over 40K and closed there for the first time. Also heavy volume in the small caps continued though not as highs as Thursday. Nevertheless, good volume means buyers are stepping up, the Russell 2K finished at its highest level since January 2022 and is within 10% of an all-time high.
With SPX, Industrials and Nasdaq all sporting new record highs the support levels keep climbing. Though we cannot dismiss the breakout and gap levels established recently, there is not much in the way of resistance. But, the pullbacks and corrections will be painful and fierce when that happens. SPX 500 support still at 5,450 and 5,475 but some levels of support now at 5,500. Dow Industrials have 40K as support, where it actually finished the week.
The Internals
What’s it mean?
Nothing like a followthrough day to confirm your suspicions. Though Thursday was not the grandest of sessions, the small caps really were the story and pushed the internals into the positive. Look at that VOLD, a second straight day of strong volume and breadth. Ticks were also strong and the VIX weaker, but a late run higher into to close of volatility buyers trimmed stocks in the end. The ADSPD was very positive again, another trend up day. Things are looking bullish for this market.
The Dynamite
Economic Data:
- Monday:N/A
- Tuesday:Retail sales, import/export prices, business inventories, NAHB housing market index
- Wednesday:Mortgage Apps, Housing starts, Industrial production/cap utilization, Fed Beige Book
- Thursday:Jobless claims, leading indicators
- Friday:Japan Inflation rate (June)
Earnings this week:
- Monday:GS, BLK
- Tuesday:BAC, MS, PNCE, UNH, IBKR, JBHT
- Wednesday:ASML, ALLY, JNJ, SYF, EQX, AA, DFS, CCI, UAL, STLD, ELV, AA
- Thursday:CTAS, INFY, NOK, KEY, TSM, NFLX, ISRG, PPG, AAR
- Friday:AXP, SLB, TRV, HAL
Fed Watch:
A pretty nice job by Chair Powell last week on the Hill. In double testimony he re-affirmed the committee’s need to watch the data and hinted the next move would likely be a cut rather than a raise. Higher for longer was not heard much, meaning they intend to cut rates at some point this year. Other fed speakers reiterated the same position. Chair Powell speaks on Monday, two other fed speakers are out later in the week.
Stocks/Issues to Watch This Week
Retail – Sales for June are out Tuesday morning and I will be looking for some strength following a couple of poor readings from the Spring.
Amazon – Kicking off prime days this week (Tue/Wed) this is a very popular event where shoppers go crazy for bargains. This has become a huge staple for Amazon’s earnings.
Tesla – After an explosive month the stock had virtually recovered all of its 2024 losses by Wednesday. This is a high momentum name that will definitely move markets. Any news about this car is going to bring out the traders in spades, with expiration on Friday it could get interesting.
