The Fuse
Equity futures are strong this morning, following up on yesterday’s nice surge in the SPX 500. Note however, breadth was poor and the Russell 2K and Down Industrials were down on the day. As we head into the long weekend, expect to see volatility recede.
Interest Rates are down a bit as the term structure steepens. Fed funds futures now see a 36% chance or greater of a rate hike in June
The latest on the debt ceiling situation may see a resolution soon. Both sides seem to agree to cap spending for the next two years. Europe’s economy is teetering on the brink of recession, and Germany is already there.
Solid earnings last night from Marvell, Workday but a miss by Costco as retail continues to struggle. Technology is the game right now, as earnings beats push these stocks much higher.
As we approach the long weekend many are watching Washington again as we all hope for an agreement to raise the debt ceiling. Volatility often recedes as we head into a long weekend.
Overall breadth was poor again, nearly 2-1 negative but the macro seems to be leading the way at the moment. With the Nasdaq and SPX 500 higher and the rest of the market demonstrably lower, there is little reason to believe this rally can extend for too much longer.
Strong volume in the positive indices yesterday, and as we finish out the week we should see volume levels retreat. Markets are not at resistance levels yet.
We remain in a range, the SPX 500 below 4200, which is the ceiling. Good support at the lows this week at 4100, so a 100 point range for now, which is quite narrow – but the VIX being low and realized volatility dropping hard tells us this is the situation for now.
The Internals
What’s it mean?
If you did not look at the SPX 500 and Nasdaq you would think the markets were down across the board. Thanks to NVIDIA, the big indices soared higher and dragged up some tech names along with it. The VOLD was weak but the ADD, down all session actually improved towards the end. Put/calls were down, meaning plenty of call buying early and often. Sentiment here is bullish. The VIX peaked at thee start of the day and headed lower, but still a bit elevated.
The Dynamite
Economic Data:
- Friday: PCE for April, Durable goods, Michigan sentiment
Earnings this week:
- Friday: BIG, BAH, BKE, HIBB
Fed Watch:
Hawkish. That’s all you can say. We have Richmond Fed President Barkin later today. We have another coming up this week, Susan Collins from Boston.
Stocks to Watch
NVIDIA – This stock is up strong in 2023 on hype and promise with AI. They will deliver earnings on Wednesday, we’ll see if it is a sell the news event.
Washington DC – Those dreaded debt ceiling talks continue as we march toward a hard deadline.
Volatility – In front of a holiday week, we often see volatility get smashed down by the end of the week.