The Fuse
What are futures doing?
Sellers are getting serious today as the futures are hammered early after big selloffs overseas. Korean stocks were torched as were other Asian countries in a huge rout. SPX futures down more than 1%, Nasdaq off a whopping 3%.
News
No hiding out this morning, the STOXX fell hard, down .8% on heavy trade led down by declines in France and Germany. The FTSE fell .6%, gold is down sharply as is silver, crude barely changed. US dollar index was flat. yields are declining with German bunds and US 10 yr treasuries off 3bps, Japan got rocked down 3.5%, Hong Kong off 1.7% and Shanghai down 1.4%.
Volatility
The VIX did not pop much Monday but it is catching a nice bid this morning. We’ll see a sharp rise in volatility at the open and perhaps a bit of buying but most likely traders will step back to see where things settle.
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Interest Rates
Yields are down across the board in a safety trade, moving money from equities into bonds. As such, the yield curve is lowering across the board, that is bearish for stocks. 2/10 spread remains tight, high yield is going to take a hit today while fed futures now predicting a hike in September. Bank of America seeing three hikes in 2026.
Earnings
Things are picking up slightly with earnings this week, some big names like Micron, FedEx, KB Home and Carnival, Cerebras, and Jefferies among others.
Events
Tough day for the bull case on Monday. Folowing the 3 day weekend buyers were in no mood to bid the market higher, and with a strong surge up early the buyers were a ‘deer in the headlights’ for those looking to take profits early. That is quite normal, especially with a rise in volatility after a long weekend. The disappointment is how the market finished, flattish for most of the day. We’ll see if there is a turnaround Tuesday.
Breadth
it would have been quite the trick for the volume Monday to beat last week’s expiration day volume. As it is, the Industrials and small caps were the strongest indices and actually had decent turnover, but failed to help tech and the other market leaders rally. Early volume trends went from bullish to bearish, that is a pattern the bulls wish to turn around today.
Volume
Maybe we are in a consolidation period until the end of the month, that would not be a surprise. Not much of a bid present yesterday, no surprise following expiration day when supply (extra stock) is the issue. The 20 day moving average is acting as a magnet for the SPX 500, the 50 ma climbing up quickly. That has been good support.
Support Levels
/Settling back a bit on Thursday was unexpected, Wednesday’s fiery test of support could be labeled a success. Yet, we have not really seen a good drop lower on volume to scare anyone yet, and with few catalysts to drive markets lower (that we know of) the bulls retain control of the tape.
The Internals
What’s it mean?
Tough day for the bulls, after the first couple of hours they just could not get any momentum going. VOLD and ADD were a mess all session, ticks were mostly red even as the markets were rising early in the day. That is a bearish divergence. Put/calls were steady, the VIX rose up modestly, but the action was not inspiring. Turnaround Tuesday anyone? Catalysts are just not there.
The Dynamite
Economic Data:
- Tuesday:PMI’s
- Wednesday:New home sales, leading economic indicators
- Thursday:jobless claims, PCE, durable goods, GDP revision, fedspeak
- Friday:Trade numbers, inventories, sentiment final
Earnings this week:
- Tuesday:CCL, KFY, SUNB, FDX, BKH, WOR, CBRS
- Wednesday:PAYX, NG, DART, LVO, PODC, MNY, MU, TCOM, FUL, WS, MEI, JEF, MLKN
- Thursday:LOT, NNOX, BB, CMC, AYI, MKC, SNX, DRI, VTIX, WGO, AOUT, WSE
- Friday:APOG
Fed Watch:
Kevin Warsh spoke last week after the Fed decision and it really was not surprising what we heard. The new Chair of the Fed is going to do things differently, and not just with rates. He is creating several task forces to deal with changes and new initiatives, expect less transparency though, which will create some uncertainty in the markets.
Stocks to Watch
SpaceX – This was one to watch last week, and no doubt the first trading week was turbulent. But this week coming up may help define a trend for the Musk company, as some sellers decide to cut bait — if the stock falls more that may not happen.
VIX – Market volatility often declines into the end of the week, that happened and now we’ll see if there is some payback. It may open the door for the dip buyers if the market swoons.
Micron – The big DRAM producer reports earnings this week and many are wondering how much higher it can go. The stock has been on fire and caused some other names like Sandisk to rip higher as well. Expect strong earnings and a solid report.
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