The Fuse
Equity futures are modestly higher as the market awaits inflation data and results from the latest Fed meeting. It is likely the committee will use the May CPI results this morning in a discussion about policy. With the ECB cutting rates last week but raising their inflation forecast it will be a challenge for the committee to keep the ‘higher for longer’ mantra going much further.
Interest Rates are moving slightly lower this morning as bond traders await the important May CPI number. After rates shot up following the hot inflation (wage) numbers last week, yields have started to decline some, but the overall trend still appears higher in rates. That can be corrected however with some dovish talk.
Crude oil is up sharply again, another 1% higher, gold and silver are modestly higher as well. Stocks and bonds in Europe rose as the euro stabilized. The dollar is a bit weaker. All eyes are on the Fed later today, they are unlikely to move rates but may offer some insight in the dot plot about policy going forward. Stocks in Asia were mixed, Japan and Hong Kong fell while Shanghai finished modestly higher.
Earnings last night from Oracle were okay but it was deals announced with Microsoft and Google that have this stock flying this morning. Rubrik reported earnings for the first time as a public company and did not disappoint. Casey’s was also very strong. Tonight we’ll hear from Broadcom and Dave n’ Buster’s.
Today is the day! At 2pm the long awaited decision on interest rates by the Federal Reserve. The committee will likely hold rates steady, arguing inflation remains sticky and far too high. Further, they are likely to comment on the strength in the economy albeit down from a strong Q4 in 2023.
The goal of course is to see inflation trending downward towards their 2% objective. Once that is seen for at least a few months then the discussion of rate cuts can occur.
Typical pre-Fed action on Tuesday with poor breadth but lower rates. Clearly market players are worried about any surprises from Chair Powell or the Fed, and that means a more cautious approach. If market players are pleased that no further rate damage will occur and some soothing words from Powell, we could see a much larger rally unleashed before the end of the quarter.
Higher turnover from the Nasdaq as that index posted fresh all time highs. The SPX 500 did as well but on lower turnover, in fact across the board we have seen some of the lowest volume of the year since late May. That is often the case at new highs, the wall of worry is up and most investors are waiting for the dip to buy – which often does not happen when most everyone waits for it.
Another new high but there are some levels of support, the SPX 500 has one at 5,325, right near the lows from Tuesday while the Nasdaq appears to have support at 17,100 (comp). The Nasdaq 100 has a layer of support at 19K but there could be a nice charge higher to 20K by the end of the week if the bulls take control.
The Internals
What’s it mean?
The bears seemed to have their chances but may have once again fumbled that away. VOLD was poor all session as was the ADD, but price action was robust following a drop early in the session. Notice the heavy red ticks early in the day but the green arrows got stronger as we moved on, put/calls stayed down as the VIX rallied but finished surprisingly near lows of the session. This sets up for some fireworks today..
The Dynamite
Earnings this week:
- Wednesday:VRA, AVGO, PLAY
- Thursday:SIG, ADBE, RH
- Friday:N/A
Economic Data:
- Wednesday:CPI for May, Fed meeting Ends, Press Conference
- Thursday:Jobless Claims, PPI
- Friday:Consumer Sentiment, Import/Export prices
Fed Watch:
It’s a big week for the Federal Reserve, which has another big meeting coming up. This two day meeting will likely result in no action on the fed funds rate, but a new set of projections will be released. Inflation remains sticky and a problem to the committee, if they see more challenges ahead they will simply reiterate ‘higher for longer’ until conditions improve.
Stocks to Watch
Apple – Their annual Worldwide Developers Conference (WWDC) is this week and many believe they will spend a generous amount of time and capital on AI functions. Many consumers are waiting on new iPhones in order to move on the new releases, which could come as soon as 2025. This conference is one that could start a gamechange for Apple.
NVIDIA – After reaching new heights last week, the most valuable company in the world, NVIDIA’s stock will split 10-1 this week.
It’ll be interesting how it trades, will more sellers show up cutting their positions? Probably so, but the stock won’t move nearly as much.
Inflation – CPI and PPI readings will be out later this week. These will be the two main economic data reports delivered. All eyes on the CPI as economists expect very little change in May (1.7% annualize for the month/month).
