The Fuse
Equity futures are ripping higher this morning following a ruling by a Trade Court in the US that said President Trump’s tariffs were illegal and the government should stop collecting this tax. Further goosing the markets are NVIDIA strong earnings and the closeness to 6K, where it seems this time around that objective will be met soon.
Interest Rates are rising again as uncertainty over the deficit and budgets may be turned upside down with the ruling on tariffs. High yield remains strong as these yields with treasuries is tight, fed futures also remain steady.
With the strength in futures across the board we saw good action in Europe and Asia. Stocks rallied all over including France, Germany, Hong Kong and South Korea. Gold is about flat as is crude oil. However global bonds have sold off, 10 yr US treasury right near 4.5%.
Earnings last night from NVIDIA were strong though some metrics lagged a bit. This was not the homerun that bulls hoped for but good enough to get the stock back to all-time highs. Salesforce had very strong earnings and good guidance, Veeva really hit a strong report and guided up, that stock up nearly 14%. This morning Best Buy, Kohls, Foot Locker and Burlington while tonight we’ll hear from Dell, Costco, Marvell, Ulta, Gap, Ambarella, Zscaler and Elastic.
It appeared markets were going to followthrough on Tuesday’s powerful rally, but it was not to be. However, there is a big pop in futures overnight that could provide the fuel to give the SPX 500 a run towards 6K. From the start yesterday it had the feel of a ‘risk off’ session, but one that simply had a back n’ fill action rather than something more ominous. Further, in front of NVIDIA earnings there was some angst, that turned out to be unfounded, this stock is strong following a beat on earnings.
Poor breadth that was the condition from the start of trading got worse and worse as the day wore on. That’s not a tragedy though, but a better than 3-1 bearish trend in the a/d line could be the start of something ominous if there are more distribution days accumulated. Oscillators slipped back into the negative but a bounce back into positive territory would be positive.
If you’re bullish and the markets turn down you want to see this happen with lower volume like Wednesday. That tells us the selling was not with high conviction, and that means the big money buyers are picking up the market on the dip. We may see more dip buying later in the week as we close the books on the month of May.
Even as the markets fell through some support yesterday the target for the markets remains simple: new all time highs or bust. The recent pullback looks to be ideal for dip buyers, and if that happens with a huge open today then indices are on their way. We recently experienced new highs in the CVB (cumulative volume breadth) where new highs often follow.
The Internals
What’s it mean?
Now that’s what I call a good old-fashioned ass kicking by the bulls. The bears did not stand a chance as buyers came swarming in and lit up the markets like a xmas tree. Just look at the ticks, green all day long, nary a sell program. VOLD had its best day in over a week, finishing out strong as did the ADD and ADSPD, which finished as a trend up day. VIX was hammered as well, but this indicator now shows high complacency, which will eventually be paid back.
The Dynamite
Economic Data:
- Thursday:GDP revised, jobless claims, pending home sales, 5 fed speeches
- Friday:PCE, consumer spending, inventories, consumer sentiment, Mary Daly speech
Earnings this week:
- Thursday:FL, BBY, KSS, BURL, MRVL, DELL, ESTC, ULTA, COST, GAP, ZS, AEO, AMBA, NTAP
- Friday:SCVL, CGC
Fed Watch:
After some suspected relief from President Trump over trade policy this weekend the Fed may be willing to take a more dovish stance. Simply put the committee is not convinced tariffs won’t be inflationary. We’ll hear more with the many speeches this week along with the minutes from the last fed meeting in May.
Stocks to Watch
NVIDIA – The big semiconductor company will release earnings this week and all signs point to another strong report. Having fallen sharply last month the stock really bounced back in a big way, but it will be this report Wednesday evening that really tells us how traders will be positioned.
Costco – With weak earnings from Target and even Walmart some out there are questioning retail stocks, so Costco’s report will be analyzed carefully. Are they seeing any slowdown of spending? How about tariffs and trade?
Interest rates – Will this finally be the week rates come down as bond buyers step up to add more fixed income? It seems the sellers have been rampant of late, causing yields to rise to worrisome levels.
