The Fuse
Equity futures are pointing lower this morning after some sharp words were spoken from the US and EU about steel tariffs. Further, China and the US each accused the other for violating a verbal agreement between the two, this could escalate more.
Interest Rates are on the move and not going in the bulls’ direction. The 10 yr yield is popping up and may be making a run to 4.5%, which could be troublesome for stocks. High yield remains steady but spreads have widened a bit this morning, and with a couple weeks before the next fed meeting fed funds futures see no rate move at the June 17th meeting.
Stocks overseas were mostly lower, in Europe the STOXX was donw .2% led lower by France and Germany, FTSE in England was flat. The dollar index fell .5%, gold and silver are ripping higher by more than 1%, crude oil is up strong, more than 3.5%. German 10 yr bund yields were up 4bps, US 10 yr treasury yields up 3 bps, in Asia stocks were down – 1.3% in Japan, and .8% in Hong Kong. Markets in China were closed.
Earnings are slower this week but still some big names reporting like CrowdStrikes, Hewlett Packard, Dollar Tree/Dollar General, Broadcom, Lululemon and Ciena.
A short week of trading but filled with plenty of punch. Tuesday’s monster rally set things in motion as rates also fell. For the month of May it was a good one for the bulls, rising 6.4% to put the SPX 500 into the green for 2025. That same for the Nasdaq, which staged an impressive run higher and is only 5% away from all time highs. With strong momentum we believe it can make a charge up to those levels this month barring any erratic news.
Breadth was poor on Friday but not nearly as bad as it was earlier in the session. Oscillator are still negative though and that could be troublesome if the market starts to roll over. New highs though look ready to expand, and that would be a positive development. Market volatility remains elevated but realized volatility is back to its lower levels.
A high volume print Friday on the last day of the month was not unusual, but considering it was a flat day and well off the lows of the session (hit midday) we’ll take that as a win. We often see money flows kick in at the start of a new month, let’s see if that happens this week. The official start of summer is not far off and that often means turnover is much lower, so expect some erratic price moves over the next few months.
That 6K level remains elusive on the SPX 500, and the longer it takes to pass it the harder it will be. But, with the index only 1.5% away it’s not a done deal yet. The Nasdaq is about 5% away from all-time highs and could get there within a few session, the Industrials much further away. Support on the SPX 500 remains at the 20 ma, call it 5,820 for now and rising.
The Internals
What’s it mean?
Another day of blah action for the internals. The VOLD barely budged and the ADD, while it finished near highs of the session still was below the zero line. This was a day when you expected both bulls and bears to compete and lose. Put/calls remain higher than normal, the VIX down again while ticks were pretty even with buy and sell programs.
The Dynamite
Earnings This Week:
- Monday:CPB, SAIC, CRDO, ABVX
- Tuesday:DG, NIO, SIGN, OLLI, NESR, CRWD, HPE, GWRE, ASAN, MAMA, HQY
- Wednesday:DLTR, SCM, TTGT, THO, GCO, MDB, FIVE, PVH, PL, CHPT, VRNT, BARK
- Thursday:CIEN, CBRL, LE, BFR, TTC, VSCO,DLTH, AVGO, DOCU, LULU, BRK, IOT, WOOF, ZUMZ, BRZE
- Friday:GIII, ABM, FCEL
Economic Data:
- Monday:PMI Final, ISM, construction spending, auto sales, fed speak
- Tuesday:Factory orders, JOLTS, Fedspeak
- Wednesday:ADP, services PMI final, ISM services, fed beige book, Bostic/Cook at Fed listens event
- Thursday:Jobless claims, trade deficit, productivity, fed speak
- Friday:May jobs report, consumer credit
Fed Watch:
Lots of Fed speakers out this week before the next Fed meeting which falls on June 18th. The committee last suggested a couple of rate cuts in 2025 and may be willing to stretch it out further following some positive reads on inflation. However, growth is still pretty strong and the looming inflation that is coming from tariffs is likely to derail any set plans of execution.
Stocks to Watch
Interest Rates – We remain focused on where rates are moving, this past week saw the 10 yr falling for the first time in awhile. That is important as treasury and the rest of government would like to see yields fall further towards 4% or lower.
Trade – Last week with some ‘easing’ against the EU the stock market rallied sharply. If there is any news to move markets we’ll be paying close attention.
Labor – The May report looms large on Friday as expectations are high for another strong report. Consensus says 125K but that would be lower than the prior month.
