The Fuse
Equity futures are up sharply this morning as the insatiable appetite for stocks continues on. Volatility is low and while it is the bulls feel emboldened.
Interest Rates are a bit higher this morning as more funds are re-positioning out of fixed income into equities.
After the close last night the Fed disclosed results of bank stress tests, the annual test to see if banks can survive a disastrous outcome.
The mostly passed, and now will decide how much capital to return to shareholders. This is a positive for the group, but technically banks have been rather weak, we’ll see if that turns around as we approach earnings season.
Strong earnings and guidance from Micron last night is giving a nice bid to the tech names this morning. We’ll hear from Nike later tonight.
Volatility is still coming in as we approach a holiday-shortened week. The central bank forum did not disclose too much new information, markets were moving up and down as stop losses were tagged high and low.
Breadth was mediocre but did manage to close positive, improving the oscillator. Nasdaq had much better breadth, overall the A/D line was stimulated by strength in the Russell 2K.
More low turnover but was we come to the end of the quarter and approach earnings season, we’ll see volume start to pick up.
A poor effort of followthrough from Tuesday’s strong rally. We still see 4,400 as stiff resistance for the short term. The recent pullback may be enough to ‘reset’ prices for a new leg higher, which could approach 4,450 then 4,550.
What’s it mean?
A rather muted day all around the internal indicators. Following a very strong up session Tuesday stocks took a breather. The VOLD barely moved while the ADD finished slightly above zero. VIX moved downward again as that indicator is in a sharp downtrend. Notice the rise again in put/call though, traders are buying protection. Something to watch for.
The Dynamite
Economic Data:
- Thursday: GDP estimate, Jobless Claims, Pending Home Sales
- Friday: PCE, Michigan Sentiment Index
Earnings this week:
- 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.