The Fuse
Equity futures are mixed this morning as Nasdaq is taking it on the chin with a modest pullback. SPX 500 futures are flat while strength is seen in the Industrials and small caps. All of this could change drastically with the release of PPI for June, out before the open.
Interest Rates are modestly lowering, fixed income buyers trying to reverse those losses from yesterday. 2 yr yield is pushing up towards 4% again, 10 yr finished stronger following the mixed CPI from Tuesday. High yield looks to have topped, fed futures see a 46% chance of no cut in Sept, up from 30% a week ago.
In Europe the STOXX was lower by .2% led by France and Germany, the FTSE was flat. Dollar index was off .1#%, gold and silver barely changed. Crude oil down 1.5%. German 10 yr bund yields were up 1bp, 10 yr US treasuries flat, in Asia stocks were mixed with Japan, Shanghai and Hong Kong flat.
Strong earnings from the banks this morning led by JPM. Solid metrics across the board here, and with a ‘resilient’ consumer. Citi and Wells Fargo also beat nicely but have risen sharply over the last month, so we might see a bit of selling.
Stocks retreated again on a bit lower volume. Other than Nvidia and the banks there was not much of a catalyst to drive stocks higher, but certainly a good spot to sell the news. That is what happened yesterday, but with nary a bid the last couple of days we may see the dip buyers interested later this week. Friday is a big option expiration day.
Weaker volume again as the conviction to sell just was not there. Breadth was over poor as this indicator is tipping back over to a sell signal (one more day of weak breadth). Oscillators are back in negative territory, new highs have cooled down but still have an advantage over new lows.
The 10 day moving average was the first one up to be tested and late in the day it failed to hold firm. No problem, right? Well, a deeper correction for the 20 ma lies a bit lower, perhaps 1.5% down from current levels. That might scare enough people to believe the uptrend is over, but the dip buyers could certainly appreciate the pullback. Nasdaq is faring better while the Russell 2K is floundering again, making a run first to the 20 ma, it’s nearly there.
The Internals
What’s it mean?
The internals again were unimpressive, just downright nasty all session long. Even with some buyers in place early that rally from the open was sold hard. The VOLD finished poorly while ADD and ADSPD finished at the lows of the day, VIX rose up and finished on the highs while ticks were seeing red all day, lots of sell programs. The bulls need to pull it together or face more selling into lower support.
The Dynamite
Economic Data:
- Wednesday:June PPI, industrial production, capacity utilization, Fed beige book, fedspeak
- Thursday:Jobless claims, retail sales, philly fed, biz inventories, homebuilder confidence, lots of fedspeak
- Friday:housing starts, building permits, consumer sentiment
Earnings this week:
- Wednesday:ASML, BAC, GS, PGR, JNJ, MS, PNC, PLD, MTB, UAL, AAL, KMI, SLG, SNV, TFIN, FR, GSBC
- Thursday:TSM, PEP, CTAS, USB, TCBI, TRV, ABT, WBS, FITB, VNS, NFLX, IBKR, MRTN, OZK, WAL, WIT, CNS
- Friday:HBAN, MMM, RF, TFC, SLB, AXP, SCHW, ALLY, CMA, ALV
Fed Watch:
Several fed speakers will be out talking monetary policy and the economy this week. Some recent comments seem to believe the committee is starting to move into the dovish direction but there are still some (like Chair Powell) who would prefer to see more data to be convinced about the direction of inflation. President Trump notwithstanding, the FOMC will likely hold tight for awhile linger.
Stocks to Watch
Earnings – It is the big start of earnings for Q2 results and there could be some big market movers this week.
Banks – The financials kick things off and will hit the confessional. I expect to see strong numbers here but worry that stocks have risen too much before the print.
Netflix – The big streaming company will report earnings Thursday evening. Last time around was a big beat and the stock rallied afterwards, can it continue to beat and raise?
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