The Fuse
Equity futures are slightly higher this morning after another strong trading session Thursday. Nothing negative on the trade front in recent days means nothing can derail the momentum that has been rampant in the stock market.
Interest Rates are still elevated and looking for higher levels. The 2 yr is coming in at 3.9% after a recent rise up from 3.7%. High yield remains robust, fed futures now see a 59% chance of a cut in the September meeting.
Stocks are modestly higher in Europe, the STOXX up by .3% led by France and Germany (up .4% and.3%). The dollar index fell .1%, crude is up nicely over 1% with gold up and silver higher by 1%. German 10 yr bund yields rose 1bp, the 10 yr US treasury yield off by 1bp, stocks in Asia were mixed with the Nikkei down .2% but strong numbers in China with Hong Kong up by 1.2% and Shanghai .5% higher.
Earnings last night from tech juggernaut Netflix were strong but the stock is losing the gains from the previous day. That may just be short-lived, the guidance was solid. Interactive Brokers beat and raised guidance, that stock is up 6% early. Earnings later this am from AXP, Ally, Schwab and SLB.
What a day to be long stocks! A tremendous move by the indices, a broad rally on good turnover is just to the delight of the bulls. With nary a worry out there money is flowing into markets and capturing every morsel of liquidity. Does that worry us? It sure does, but who can stand in front of a freight train going 120 mph.
These last few days have seen good volume trends and finally the market just exploded. Big money managers are coming in strong and trying to get even longer before the bigger earnings releases next week. Tech volume has been leading the way so have small caps, the IWM pushed higher yesterday on the third straight session of strong volume. Very bullish.
After testing some lower levels this week the bulls said, ‘that is enough’ and bought the dip. Finally, a followthrough day into all-time highs, which is clearly very bullish for the near term. Russell 2K is getting very interesting here, a weekly close above 225 would get the small cap index some attention by the bulls.
The Internals
What’s it mean?
Tremendous performance by the bulls yesterday was superb VOLD and ADD even finished near the highs, something we don’t see too often. As for the ticks, super green all day as plenty of buy programs went off, put/calls still down under 65 while the VIX really got hit all session long. ADSPD not flashing a trend buy day but it was close.
The Dynamite
Economic Data:
- Friday:housing starts, building permits, consumer sentiment
Earnings this week:
- 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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