The Fuse
Equity futures are trying to bounce back from a mostly down Monday. It’s hard to pinpoint a culprit to Monday’s lackluster session but there was clearly no bid in the market the entire day, save for the Industrials. That index has been trying to pay catch up to the SPX 500 and Nasdaq.
Interest Rates are falling a bit allowing stocks to breathe a bit easier. Yesterday saw rates fall and then jump higher as the stock market fell with bonds. We don’t often see small caps rallying when rates jump but it might have just been a one day situation. Fed funds remain steady, several fed speakers out today could have influence.
Oil prices are backing off a bit after a strong run higher Monday pushing WTI crude above $80 again. Gold is slightly lower. Over in Europe stocks were mostly lower, Asia was mixed with Japan higher while China and Hong Kong dropped again. NVIDIA remains an influence on markets, it helped to drag down the Nasdaq and SPX 500 and many semiconductor names. Bitcoin fell sharply as well, those names have been under assault recently.
Earnings will be out this am from Carnival, some competitors have been doing nicely. Tonight we’ll hear from FedEx and tomorrow am Paychex and General Mills.
A lethargic day for stocks as the hangover from a big options expiration was steep. There was no trend at all during the session, and while we could attribute the slow activity to a summer session, we really have a market that is stuck in a range. After a pretty strong move up in the first quarter it may be time for a little rest. Volatility remains low and unless money is flowing we’ll have more days like Monday coming.
Another positive day of breadth, much better than Friday but that was due to the strong advance by the small caps.
Remember, 2000 stocks in the Russell 2K can have strong influence. Oil and bank stocks were mostly higher, many of these names are in the small cap universe. We’ll have a rebalance later in the week. Oscillators are starting to turn, Nasdaq remains negative.
Turnover was a fraction of Friday’s big expiration print. That big expiration printed as a distribution day, so there is some work to be done by the bulls. We have some window dressing attempts to come this week along with some influential earnings as mentioned above. We should see bigger money flows the following couple weeks as we get past the first half of 2024..
Starting to see some lower levels tested but for the most part a bigger pullback is probably needed. The SPX 500 has good support at 5550 and then 5450 and 5400, while the Nasdaq has good support at 19,400 and then 19,100. A move down to these levels and successful hold would be a positive for the bulls.
The Internals
What’s it mean?
More divergences as the internals did not reflect the price action. Sure, the industrials were higher as were the small caps. But the Nasdaq and SPX 500 finished poorly, not reflecting the strength in VOLD, ADD, ADSPD. Ticks were evenly distributed, the VIX muted while the put/calls moved down. Any sell signals that arrive should be taken seriously..
The Dynamite
Economic Data:
- 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:
- 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.
