The Fuse
Equity futures are trying to bounce back and recover some late Thursday losses. Stocks fell hard under a dark cloud of selling but not with much conviction. We’ll have to see how things go after the labor market report today.
Interest Rates are down modestly as the slow trudge down in yield continues. We may see more action after the labor market report with bonds, and certainly fed futures are likely to shift if inflation concerns are alleviated. High yield remains well bid as spreads here are tight, futures on fed funds remain steady, no cuts expected until September.
Stocks are up a bit after stocks were mostly flat in Europe. Fractional declines in France and Germany. The dollar was up .2%, gold is higher as is silver, crude oil about flat. German 10 yr bund yields were down 3bps, US treasury yields down 1bp, stocks were mixed in Asia with Japan up .5% but Hong Kong down .4%, Shanghai was flat.
Poor reaction to earnings last night with down moves from Lululemon, Broadcom, Samsara and Docusign. Most of these companies beat estimates but offered tempered guidance. Names like Broadcom and Docusign did run higher into the print, so a bit of selling is not unexpected.
In the pre-market action Thursday morning you could just feel the exhaustion. Bulls were trying to again make a stand but there was no energy left after a good start to the new month. That’s fine, we know markets don’t go up everyday. We did see an expansion of new highs during the day and that is a positive, but perhaps the VIX dropped too far and risk needs to be re-assessed.
Breadth was pretty healthy early in the session but faded badly in the last couple of hours. In the end it finished about flat, oscillators also around the zero line as well. This indicator is teetering on a buy signal, and with cumulative volume breadth at new highs it means the market should be making a new high very soon.
The wall of worry just got higher with the uncertainty in the White House. I’m referring to the spat between Trump and Musk, a verbal exchange that might threaten passage of the ‘big beautiful bill’. Volume prints over the last two months have been fairly large on ‘news’ days, the labor report is one of those big ones today.
Still trying to get to those milestones, the SPX 500 made a valiant attempt but was rejected soundly. That’s fine, the energy just was not there as buyers were nascent. The Nasdaq pulled back as well but that seemed shallow, we may see buyers come in today to add stocks on the dip. Next week is going to. be pivotal.
The Internals
What’s it mean?
With that huge failure late in the day the stock market took down the internals. The went through support like a hot knife through butter. The VIX climbed and finished near highs of the day, the VOLD and ADD just collapsed and finished near the flat line have being higher all session long. Ticks were mostly green but evenly distributed late, put/calls were on the rise as that may signal some protection being bought late.
The Dynamite
Earnings This Week:
- 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.
[thrive_leads id=’60674′]Â
[thrive_leads id=’60674′]Â
