The Fuse
Equity futures are flat to slightly down this morning as traders away a policty statement from the ECB. It is widely held the committee will cut rates for the first time since Covid started. Nasdaq and SPX 500 are at all time highs, we often see more upside following those prints. We’ll also get productivity and unit labor costs.
Interest Rates are up slightly as traders position themselves in front of the ECB policy meeting. Perhaps our Fed will take a rate cut as a sign they need to follow in the ECB’s footsteps, but only if inflation starts to turn lower. Jobs data continues to flow, Challenger job cuts and jobless claims today might induce some bond buying (yields lower) if these show weaker data towards the economy.
Stocks rallied to new highs but there was also excitement overseas, the Stoxx Euro gain .6% while the US dollar fell, gold futures rising along with crude, making its way back towards $75 per barrel. Stocks in Asia were mixed, Japan gained more than .6%, Hang Seng slightly higher with Shanghai down sharply at .5%. NVIDIA closed with a 3 trillion valuation, topping Apple as the most valuable company in the world.
Earnings last night from Lululemon were better than feared, the company also raised guidance. Five Below was a mess, tonight we hear from Zumiez, Docusign and Samsara.
Markets staged a massive rally on heals of a weaker than expected ADP report. The May jobs number showed fewer jobs created during the month, a data point the Fed has been looking for that signals a cooling down of the economy. Of course, tomorrow’s NFP report could build on that confidence. AS for the stock market, new all-time highs in the SPX 5400 and Nasdaq tells you money is flowing into equities.
Breadth was pretty strong on Wednesday but not overwhelming. A 2-1 differential is very strong but the oscillators remain under zero. That could be adjusted today however with strong breadth, we’re looking at you IWM. It’s been the small caps that have led the breadth charge up and down.
There will be a big re-balancing of the Russell 2K later on this month. New highs continue to expand, Nasdaq new highs hit positive for the first time in awhile.
Strong turnover for the SPX 500 and Nasdaq yesterday as they notched a solid accumulation day. The Industrials were higher but volume waned, this index has been challenged of late. The Russell 2K can’t seem to get out of its own way, volume prints were low as the up move yesterday was likely about being dragged higher.
Okay, when an index blasts through to new all time highs as we saw yesterday we can only wait for support levels to be established. On the downside though we look for breakout points that would likely hold, which is where buyers on the dips were active. For the SPX and Nasdaq those levels were the lows on Monday/Tuesday, the SPX at 5230-5250, lower at 5,190.
The Internals
What’s it mean?
Stealth domination, that is what the internals show us from Wednesday’s action. Solid ADD and VOLD numbers all session long, but most impressive were the ticks, especially the $TICK/Q in the top right panel. Literally ZERO sell programs all session long, with heavy buying from start to finish. VIX was crushed too, put/calls rather low as good breadth won the day. Followthrough of course is important.
The Dynamite
Economic Data:
- Thursday:Challenger job cuts, jobless claims, productivity/unit labor costs
- Friday:May Employment report, consumer credit
Earnings this week:
- 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.
