The Fuse
Equity futures are catching a bid from modest strength overnight. It seems this new month is off to a rousing start and headed for a collision with resistance, but we are not there just yet. The labor report tomorrow could be a twister.
Interest Rates are a bit lower this morning as bond buyers continue to pick up bargains. The 10 year yield is starting to come down again and may test the 4.265% level soon, which is the 200 day moving average. High yield remains well bid and reflects strength in the economy, fed futures see no change in policy rates in 2 weeks.
Stocks are modestly higher and gained some ground in Europe overnight. STOXX was up slightly, about .1% with France and Germany about the same, FTSE was also up .1%. Gold is higher by .5% while silver has reached multi-year highs. Crude is up as most commodities catch a bid. German 10 yr bund yields held firm, US 10 yr treasury yields were up 1bp, in Asia stocks were mixed. Japan fell .5%, but in China markets were up, Hong Kong higher by .9% and Shanghai .2%.
Earnings last night from MongoDB were a smash hit, and a big buyback helped as well. PVH was a miss as was Five Below but the latter is up nicely in the pre-market. Ciena is out this am as is Cracker Barrel, tonight is the big one with Broadcom, Lululemon, Rubrik, Docusign and ServiceTitan.
The fight between the bulls/bears is fierce, and as volatility drops the odds of a big move also becomes remote. That becomes ever so possible as the market players become even more complacent. As of now, the trend riders are in charge as are the dip buyers. Rates have been steady and no news on the trade front is good news.
Well, it was one good day of breadth and then that indicator fell flat, literally. It was a day of equally good/bad breadth with neither side having an advantage. It is not accumulation and clearly not distribution, but without some sort of momentum from the buyers we may experience some selling on the news, which won’t be positive. The market has rallied so much that it would not be surprising to give up 2-4% fairly quickly.
Typical of a market that just climbs the wall of worry, volume trends were good but not great however that is not a dealbreaker. We had little to shout about Wednesday as the turnover was rather muted, yet we could see some heavier turnover hit by the end of the week with the May labor report. The problem may be if the report is not taken too well and a major selloff ensues.
Still seeing a good start to the month but given the broadness of this rally and the wall of worry being climbed the momentum players are in charge. The SPX still sees 6K as resistance, 22K on the Nasdaq is within earshot. These milestones may be an excuse to do some selling however if there is no energy to push markets higher.
The Internals
What’s it mean?
An interesting day for the internals as some were pointing bullish while others were not. Notable bullish qualities from the TICKS and VIX and put/calls, which were lower again. On the bearish side was breadth, the VOLD and ADD were stronger early in the session but faded all day long, as did the ADSPD. Let’s see if things clear up by the end of the week.
The Dynamite
Earnings This Week:
- 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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