The Fuse
Equity futures are rallying this morning, continuing yesterday’s late surge. There has been a strong bid late in the day over the past few sessions, but with a jobs report looming it might be difficult to see investors/traders jumping at the market before Friday’s open.
Interest Rates are slightly higher with the 2 year up near 4.8%, but the 10 year remains in a downtrend, ticking in around 4.35%. Fed futures are steady and continue to price in a rate cut or two by December. Spreads on high yield vs treasury are very tight.
Yesterday’s JOLTS report signaled the labor market may be slowing down. Openings were down sharply from the prior couple of months.
Oil prices are up slightly as is gold.
Earnings out last night from Crowdstrike were strong, they also raised guidance. HPE was also pretty good as was Verint, Stitch Fix is pushing higher.
Another day of turnaround action as markets swooned early but by midday the recovery was on. The last few sessions have taken on this characteristic with early selling, a bottom around noon and then a market surge. That often means the big money managers are coming in hard late in the day to pick up the pieces left from the sellers. It simply means the bull market continues onward.
Breadth continues to be poor and is on the verge of a sell signal. Oscillators pulled back as well, remember they came close to traveling above zero last week but fell a bit short. New highs continue to dominate new lows, that indicator has been strong for months. Bulls would like to see a recovery in the breadth this week if they are determined to see the markets hit new highs again.
Volume picked up during the early part of the session and then late, sellers hit the button early while buyers came swooping in late. That has been the pattern recently, but as we trudge through the summer months we’ll see volume recede, and with low volatility conditions that means we are likely to see erratic price movement.
The Industrials are trying to make a stand here and push through 39K. That level is heady resistance, the industrials fell hard from there and tested 38.1K last week. The Nasdaq remains buoyant with support at 18.5K, the SPX 500 is trying to mount a rally above 5,300 again, recent lows at 5,200 are strong support.
The Internals
What’s it mean?
Internals were challenged on Tuesday despite an up market and better ticks late in the day on the $TICK. Notice a rise in the put/call, that needs to be watched carefully. VIX remains down and sunk below 13.3%, while the ADSPD showed nothing. It seems as if traders simply wanted to get through the day and get to the next data point, which is jobs later in the week.
The Dynamite
Economic Data:
- Wednesday:ADP employment, SPX service PMI, ISM services, crude inv.
- Thursday:Challenger job cuts, jobless claims, productivity/unit labor costs
- Friday:May Employment report, consumer credit
Earnings this week:
- Wednesday:CPB, UNFI, FIVE, LULU, VSCO
- Thursday:BIG, CIEN, SJM, DOCU, AVO
- Friday:JILL
Fed Watch:
Fedspeak will be silent this coming week as the committee prepares for it’s next meeting June 11/12. We do not expect a rate move then but a new set of projections will certainly tell us where they stand on inflation, GDP, employment and the funds rate. Last week had a mixture of policy ideas but when it comes right down to it, that is all simple noise.
Stocks to Watch
Data – Important releases this week from PMI to ISM to labor. We’ll be watching the manufacturing and production data closely, along with productivity and unit labor costs. This will tell us if growth was driven by inflation or production.
Employment – The May jobs report looms large. It’s possible to see a 4% rate on unemployment for the first time in years, and that will wake up the Fed. The expectation is about matching with April, but wages are expected to tick higher.
NVIDIA – The last week this stock trades above 1000 for some time, the stock will commence a 10-1 stock split in a week, perhaps garnering even more attention. For certain, the stock needs to cool down some but that might not come until after the split.
