The Fuse
Equity futures are rebounding this morning after yesterday’s rollercoaster session. For most of the day the price action was subdued but after the 230pm Powell press conference the numbers really started to shake. A 70 handle move up was met by an 80 handle move down. And it was only about 90 mins worth. Machine algos running the show here at the moment.
Interest Rates are flattish to slightly lower this morning as the bond market seems relieved that Chair Powell yesterday took rate hikes off the table. Yet still, the Chairman did say inflation was not moving as they had liked and the committee would be satisfied to hold rates at current levels even longer than anyone could imagine. Fed funds futures are barely pricing in one cut this year, but that may be far-fetched.
Gold has settled down after a few volatile sessions, crude is also settling under $80 per barrel, perhaps gearing up for another run soon. European stocks were up modestly, the Japanese yen fell more against the greenback, the Hang Seng market jumped 2%, the US dollar is a bit weaker while bitcoin is slightly higher. Germany’s 10 yr bund yield are down 2 bps
Earnings were a mixed bag here last night but strong numbers from Qualcomm may certainly light a fire under the semiconductor stocks. Carvana beat and raised, that stock is up strong. However, weak numbers from Etsy, Fastly and First Solar have those stocks down sharply. Later today we’ll hear from Apple, Block, Cloudflare, Amgen and DraftKings.
Stocks ended lower on Wednesday but for a brief moment they had surged, thanks to some words by Chair Powell following the release of the Fed statement. It was a topsy turvy time but until then prices were capped as appeared likely the 5K level on the SPX 500 was going to be tested. That did not occur however but certainly the volatile moves come with some angst and worry. Buckle up, we have Apple earnings tonight and a jobs report Friday am.
A good day for breadth as it was shining bright all session long. Even as the markets nosedived late in the day the breadth stayed positive and turned the oscillators to the bullish side. New highs are starting to show up again the NYSE but the Nasdaq remains challenged. A couple more good days of breadth and the markets will have a new buy signal here.
More big turnover as stocks had a wide range and finished on their lows. That is normally a bad sign, buyers are simply not interested. Yet, when the vix started declining, suddenly the futures buyers started to get busy again. That is the combo trade that has been effective since November 2022. High turnover in the DIA was good as that index turned positive, but a 500 point turnaround was not inspiring.
As the big range remains the playing field it opens up to days like today when the SPX 500 can move up 70 handles then right back down 80 handles. This is machine-driven action, how can it be anything else? We still see 5K as tepid support for the SPX 500 while the Nasdaq 100 is still flirting with 17K. That could be a good level to buy eventually.
The Internals
What’s it mean?
It’s truly remarkable how the internals can be pushed around by machine-driven trading. That happened yesterday, a wild session seen in the VOLD and ADD, up then down. Ticks were mostly green, so that seems to set the stage for some up days to come, while the put/call ratio raced higher, seems players were reaching for protection. We’ll have more wild action later in the week.
The Dynamite
Economic Data:
- Thursday:challenger job cuts, jobless claims, productivity and labor costs, factory orders
- Friday:NFP report for April, ISM non-manufacturing, SPX global PMI
Earnings this week:
- Thursday:CMI, CYBR, IDCC, LIN, PH, UTZ, VMC, AAPL, SQ, NET, DLR, FTNT, HOLX, MSI, OLED
- Friday:FLR, HSY, XPO
Fed Watch:
The third Fed meeting of the year as the committee grapples with higher inflation. That has been the case since the start of the year, a pretty frustrating situation for the committee. We have heard from several members there is no rush to cut rates. We may hear something from Chair Powell Wednesday to this effect. Fed futures are pretty much saying no more than one rate cut in 2024.
Stocks to Watch
Amazon – Earnings are out this week and the mega cap is looking to deliver another home run. The stock is well off the all time highs (10%)but could make a big run if investors appreciate what they deliver.
Federal Reserve – Big meeting again as our eyes/ears will be focused on Wednesday’s statement and the follow-on press conference. The committee is unlikely to move rates at this meeting but the tone may be more hawkish.
Employment – April’s job report is looking to be down from March, but only modestly. It has been the job market that has held the economy together, if it starts to falter the Fed may have to step in with some rate cut discussion.
