The Fuse
Equity futures are getting belted on this PPI day, being dragged down by Boeing, who had a plane the went down in India this morning headed for London. Stocks are moderately overbought here and are due for a corrective period, how far and how long is up for debate.
Interest Rates are dropping again on the long end giving the equity markets the benefit of the doubt. Yesterday’s weaker CPI number was encouraging as the Fed may now consider rate cuts in the coming months. High yield remains robust while fed futures are now looking to nearly three cuts in 2025.
Stocks in Europe fell .4% (STOXX) as the markets there are looking to burn off an overbought condition. Germany was down the most, off .7% with France down in line with STOXX. The dollar index fell .2%, cruded oil is down sharply off recent high levels but gold is ripping higher, silver also well bid. German 10 yr bund yields were down 3 bps, US 10 yr treasury yields off 1bp. Stocks in Asia were mixed, Japan down .6% but Hang send fell 1.1%, Shanghai steady.
Earnings from Oracle last night were lights out, this stock is going higher. Tonight we’ll hear from RH and Adobe, two names that have been put on the shelf lately.
The big event not many are talking about is Apple’s WWDC. The stock has been floundering of late but perhaps this event will bring out something new and special for all the Apple heads to grasp onto. This event in the past has been rather sleepy but not many have been predicting this time around, sets up for a surprise.
Poor day of breadth as the markets retreat some on moderate turnover. Stocks just don’t go up everyday and with speculation rampant and less fear from traders/investors you just know a day of reckoning is coming soon. New highs continue to expand, oscillators are still modestly positive but that could change today.
Elevated volume on a down session pegs Wednesday as a distribution day. It’s fine to have these pop up from time to time, we just need to be aware of they start to cluster. That would be a sign of bigger problems with heavy distribution coming from professional selling. We recently saw nice turnover from the small caps, that might continue on for a few more weeks but the IWM did run into some issues at resistance.
The bears slammed the door shut on the bulls yesterday, especially the upstart small cap IWM right at the 200 day moving average. The markets just said ‘that is enough’ and tossed back the indices around 2pm EST. Given the huge move up why should we be surprised when the markets pull back a bit? Nasdaq and SPX 500 still within earshot of a new all time high.
The Internals
What’s it mean?
Fairly mixed day for the internal indicators. VOLD fell late in the day but look at the drop in ADSPD and ADD. Issues were simply sold but not on too heavy of volume, but if that persists we’ll have to pay close attention to these indicators. VIX rose up a bit but ticks were spread out evenly, though lots of program buying/selling during the day.
The Dynamite
Economic Data:
- Thursday:PPI for May, jobless claims
- Friday:consumer sentiment
Earnings this week:
- Thursday:LOVE, ESTA, HOFT, CRMT, ADBE, RH
- Friday:MNY
Fed Watch:
It should be a quiet week from the Fed as they relax their ‘tongues’ a week prior to their next meeting (jun 17/18). The committee has been talking lately about the strong economy and the lack of need for lower rates, though President Trump still believes lower rates are the answer. We’ll err with the Fed and their policy mandates.
