The Fuse
Equity futures are mixed this morning as traders come back from the weekend with little news to drive markets.
This is the last trading week of June and wraps up the second quarter and first half of 2024.
Interest Rates started off lower this morning and put a nice bid under the market but have started to drift higher as the day wears on. If that continues we may see a bit more chop again as we saw last week. Fed futures still trying to price in two rate cuts for 2024, much different than what was portrayed at the Fed’s last meeting (one cut, maybe).
Crude oil is edging higher as is gold. Not much news to shake markets over the weekend, Thursday will have the first of two Presidential debates. The dollar is flat, in Europe the Stoxx 600 was also flat while the German 10 yr bund was down 1 bp. Stocks in Asia were mixed as the Nikkei climbed higher, stocks in China and Hong Kong were down sharply.
Earnings are slowing down here until the second week in July. However, we’ll have some big names releasing earnings with FDX, Nike and Micron along with McCormick, Paychex and General Mills.
It’s the start of the last week of the month and quarter, plenty of volume driven by options expiration, fund rebalancing the SPX 500/R2K rebalances. With markets near new all time highs don’t be surprised to see some profit taking before the end of the week.
Breadth was positive Friday but that was the only good thing to say about it. The breadth of the market for the past couple weeks has been atrocious. Oscillators remain negative, new lows are starting to expand over new highs. Perhaps we are in a waiting period until more funds start coming into the market. Strong gains for the indices so far this year so a pullback would not be a surprise, the breadth is showing it now.
Volume was very heavy as we expected end of day as options expiration had a huge influence. That puts a big volume bar on the markets for that day, a distribution for all indices. That is not a big deal yet, there have only been a few of these during the month of June. Higher turnover on a down session means big institutions are selling, but a re-balance is coming this week, which means even more money moving around.
Seeing some good layers of support building for this overbought market. The 5,450 on the SPX seems to be holding firm the last few days as the moving averages catch up. Below there is the gap at 5,375 then better support at 5,350. The Nasdaq has gap support at 19,200 but better support at 19K.
The Internals
What’s it mean?
Not much excitement from the internals once again. VOLD gave us few clues as to direction while the VIX and put/call took a nosedive, bullish for the markets. But ticks continue to bleed red, and that is a concern. It could be rehabilitated very easily with a few up sessions this week.
The Dynamite
Economic Data:
- Monday:
- Tuesday:Chicago Fed National, consumer confidence, Housing price index
- Wednesday:New home sales, crude inventories
- Thursday:jobless claims, adv retail/wholesale inventories, durable goods, GDP (third estimate), pending home sales
- Friday:May income/spending, PCE, Michigan sentiment
Earnings this week:
- Monday:
- Tuesday:CCL, FDX
- Wednesday:PAYX, GS, MU, BB, LEVI, JEF
- Thursday:MKC, LIN, NKE, AYI, WBA
- Friday:
Fed Watch:
Fed speak was out in force last week as the Fed governors pretty much stuck to their statement the prior week. It’ll be a month before the next meeting so plenty of data to divulge. We’ll have two speakers this Monday, three on Tuesday and another on Friday. Most likely the recent data will not yet convince the committee to cut, though markets are basically predicting a cut in September then one in December.
Stocks to Watch
Housing – Some pretty lousy home data last week and a bunch more coming this week. Could this be the tree that falls to start an economic slowdown? It could be, but if rates decline even more look for another cycle up to begin.
Sentiment – Consumer sentiment and Michigan sentiment will be released this week, and most consumers have been downright negative on the economy. Perhaps it is just a hunch or maybe just their situation, but if sentiment continues to deteriorate that may have consequences for equity and other markets.
Quarter – It has been a strong quarter for stocks even with a poor April. I’m sure the bulls would like to see a strong finish into Friday’s close. SPX 500 is up nearly 17% for 2024 so far, an amazing accomplishment following a strong 2023.
