The Fuse
Stock futures are mixed this morning as markets are trying to gain ground for a second straight session.
Interest Rates are slightly higher this morning but the dollar is down a bit. The buck has been trending lower of late. Fed funds futures continue to see a 25bps hike coming in a month but then a pause and one more hike in November (higher probability).
The big news overnight was word the Biden Administration may restrict AI chip sales to China in an effort to stymie their plans for weaponizing AI against the US or the world. Chip and equipment stocks are feeling the heat from this but the group remains in a bullish trend, hence this could be a good buying opportunity. Inflation data from Europe came out better than expected (Italy, Spain retail sales). The forum for central bankers is today and Chair Powell speaks as the market opens.
Earnings out later tonight from Micron, which is likely to move the chip sector. We heard from AeroVironment, which came in with a stellar beat and raised guidance.
Market volatility is starting to decline as we often see in front of a holiday (next week).
Solid breadth for a second straight day as this indicator is now on a buy signal. The McClellan oscillators are now in positive territory.
Moderately lower volume yesterday which would be a concern if not for the fact this is summer and we are heading into a holiday week.
A very strong move back towards 4,400 by the SPX 500, led by the big cap tech names again. Some followthrough would be good news for the bulls.
What’s it mean?
Yesterday we talked about how the indicators were pretty bullish yet the indices fell flat, and we mentioned that was a bullish development. Well that was indeed the case, look at the strong move in the VOLD yesterday and the ADD, while we nearly had a trend up session on the ADSPD. VIX resumed its decline and is now below 14% again, the TRIN looks very washed out as well. All in all a very strong session for the bulls, followthrough is key.
The Dynamite
Economic Data:
- Wednesday: Mortgage Apps
- Thursday: GDP estimate, Jobless Claims, Pending Home Sales
- Friday: PCE, Michigan Sentiment Index
Earnings this week:
- Wednesday: GIS, MU, BB,HBF
- Thursday: AYI, MKC, RAD, MSC, NKE,
- Friday: STZ
Fed Watch:
More Fed speakers out this coming week. Testimony from Chair Powell on the ‘hill last week was more of the same from the last Fed statement: More hikes coming. Currently about a 75% chance of a hike in July seems about right. Of course, data coming out to start July will change that significantly. Inflation is coming down slowly but may have plateaued, which is why the Fed is going to be more aggressive.
Stocks to Watch
Nike – Earnings coming up this week, we’ll want to hear how inventory levels are progressing along with China sales.
Volatility – Closing under 12% last week showed market players with high complacency. A back up in the VIX means the market may have more downside action.
Window Dressing – It’s the end of the month/quarter and we often see a ‘painting of the tape’, but also profit taking before the month end.
Which will it be, or will there be both? Promises a volatile week of action.