The Fuse
Equity futures are mixed following the very strong move yesterday. The VIX is up slightly after getting hammered Wednesday, the SPX 500 and Nasdaq hitting fresh new highs. Today’s PPI number will be a market mover. SPX 500 is within earshot of 5,500, the Nasdaq looking at 20K as well.
Interest Rates are moving slightly lower this morning as the bond market is in sync with Fed policy. With the lack of movement in policy and the expectation of fewer rate cuts in 2024 there is little reason to move off 4.25% on the 10 year yield at this point. Fed futures adjusted yesterday on the benign CPI report and then later after Chair Powell spoke.
Inflation seems to be coming down slowly, that is the message from the BLS report yesterday. That’s good news of course, the FOMC decided to leave short rates where they are but were pleased by the data. As Powell put it, the jobs market is slowly coming in as is inflation, but they need to see more data to be certain. Gold is backing off about 1%, crude down about the same. Japan closed down as did Europe but Hong Kong was up overnight.
Broadcom delivered some strong earnings last night along with better forward guidance and a 10-1 stock split. The stock is up more than 10% early on, Dave & Buster’s had a miss with lagging sales, the stock down about 10%. Tonight we’ll hear from Adobe Systems and RH.
Bears were again caught napping and at the wrong moment. Pre-market release of the May CPI report was taken favorably. The core number was better than expected, but we did see a strong bid into the market before the news. That meant regardless of the number markets were destined to rise up, and did they ever. New highs for the Nasdaq and SPX 500 once again, the ‘500 is now within striking distance of 5,500. The rally was stunning but also included the Russell 2K, impressive on its own (though it closed well below the highs of the session).
Good strong breadth, better than 2-1 but not what you would consider a rout. With such strength in the market yesterday one would have thought a 4-1 or 5-1 differential would have been achieved. However, that was not the case. Not to look a gift horse in the mouth, the Russell 2K did lead the charge higher and with strong breadth to boot. Oscillators are still negative but may push higher if the PPI is strong today.
Turnover was strong for a summer Wednesday, volume trends are turning bullish. We like a good strong volume print when markets hit all time highs, the SPY and QQQ certainly did their part. Of course, followthrough would be ideal for this rally to live a bit longer.
Once again another new high, and again not much to consider for a support zone. We could obviously use the 10 day moving average as a trailer to wait for a touch and decision point. That being the case, 5,330 on the SPX 500 and 18,900 on the Nasdaq is where it might touch next on a pullback.
The Internals
What’s it mean?
The internals showed good strength here for the a solid session but it was only at the start of the day that impressed. Notice the weaker move in ADD and ADSPD, while ticks were strong on both sides. TRIN ticked up, that due to the differential in ADD and VOLD (deep separation early). VIX sank and closed on its lows. It’s going to be a tough hurdle but the bulls seem to be in charge for the next leg up.
The Dynamite
Earnings this week:
- Thursday:SIG, ADBE, RH
- Friday:N/A
Economic Data:
- 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).
