The Fuse
Unlike earlier in the week equity futures are starting off strong following a couple of nice finishes. The new month is off to a good start and landmarks are in sight. For the Nasdaq that is 22K and for the SPX 500 that is 6K, a level not seen since February. That index has now closed at its highest level since late February.
Interest Rates are sliding a bit today as the bond market buyers see some bargains. However, rates still remain stubbornly high and continue to reflect worry about future inflation. High yield remains strong and hit new highs, TIP is settling down now, fed futures continue to see no rate cut at the next meeting in 2 weeks.
Stocks in Europe inched higher overnight with the STOXX up .3% led by a strong Germany and France. The dollar index fell .2%, FTSE was flat, gold is slightly lower as is silver. Crude oil has been on a run but is only up a fraction this morning. German 10 yr bund yields held steady, 10 yr US treasury yields fell 1bp, in Asia stocks were higher. Japan up by .8% while Shanghai and Hong Kong both up .4%.
Earnings last night from Crowdstrike were strong but some thought the guidance was light. That really was not the case but the stock is up 65% in six weeks so maybe some profit taking. Asana had good numbers and guidance, this morning Dollar Tree followed up Dollar General yesterday with solid retail number. Tonight we’ll hear from Five Below, PVH, and MongoDB among a few others.
Back to back wins for the bulls as the new month gets started off with some positive vibes. Not only did the large caps rule to roost but even the small caps participated as we saw rates and volatility decline. If that trend continues it could be the start of a magical summer for investors and traders, and we are not even at the halfway mark yet.
Finally some good breadth statistics as Tuesday saved this indicator from turning bearish. We recently saw the cumulative volume breadth indicator reach all time highs, and that often means we’ll see new market highs shortly thereafter. New highs are expanding again, oscillators just barely went positive but perhaps we’ll see this number start to expand after spending a few days in the negative.
Typical of a market that just climbs the wall of worry, volume trends were good but not great however that is not a dealbreaker.
The indices started out weak but tested some lower support early in the day and bounced all session long. That is actually a pretty strong bullish characteristic. Nasdaq was solid all session long too, with the small caps lagging due to higher rates. That continues to be a hindrance to the IWM, but if we suddenly see bond buyers show up we may see IWM pentrate some resistance levels.
The Internals
What’s it mean?
A higher quality day or the internals as markets were much calmer than Monday. We had heavy buy programs all day, check out the green in the TICKS, volatility fell sharply while VOLD and ADD were strong. However, it appears maybe the bulls are getting tired here, 4 days up in a row for the Industrials as they are playing catchup.
The Dynamite
Earnings This Week:
- Wednesday:DLTR, SCM, TTGT, THO, GCO, MDB, FIVE, PVH, PL, CHPT, VRNT, BARK
- Thursday:CIEN, CBRL, LE, BFR, TTC, VSCO,DLTH, AVGO, DOCU, LULU, BRK, IOT, WOOF, ZUMZ, BRZE
- Friday:GIII, ABM, FCEL
Economic Data:
Fed Watch:
Lots of Fed speakers out this week before the next Fed meeting which falls on June 18th. The committee last suggested a couple of rate cuts in 2025 and may be willing to stretch it out further following some positive reads on inflation. However, growth is still pretty strong and the looming inflation that is coming from tariffs is likely to derail any set plans of execution.
Stocks to Watch
Interest Rates – We remain focused on where rates are moving, this past week saw the 10 yr falling for the first time in awhile. That is important as treasury and the rest of government would like to see yields fall further towards 4% or lower.
Trade – Last week with some ‘easing’ against the EU the stock market rallied sharply. If there is any news to move markets we’ll be paying close attention.
Labor – The May report looms large on Friday as expectations are high for another strong report. Consensus says 125K but that would be lower than the prior month.
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