The Fuse
Equity futures are ripping higher today after President Trump says he will announce his first trade deal with a big country. Rumor has it this is England, and the deal may not be large in scope but perhaps keeps both parties at the negotiating table for longer. Volatility is receding on this potential news but the indices are simply getting back what they lost earlier in the week.
Interest Rates are rising a bit today following the latest Fed action (no cut) and press conference by Chair Powell. He is adamant about staying the course and with a strong economy along with low unemployment the committee is satisfied to stay where they are for now on rates. Fed futures still see three cuts in 2025, that is too much to anticipate at this point. Yields are junk remain rather tight which is a good sign for the economy.
Stocks are looking to move higher today as the VIX recedes and news flow still dominates the action. Europe rose .3%, led by nice gains in France Germany. The dollar also picked up, higher by .2% but gold is down more than 1% in volatile trade, as is siver. Crude oil is up nearly 2%. German 10 yr bund yields held steady, US 10 yr treasury yields rose 3bps, Stocks in Asia were up, Japan higher by .4%, Hong Kong up .4% with Shanghai with a modest gain of .3%
Earnings from ARM Holdings were strong but just not good enough while Axon and Applovin hit it outta the park and with strong guidance. This morning Peloton, Shopify and ConocoPhillips, then later tonight The Trade Desk, Coinbase DraftKing, CloudFlare and Affirm.
There is a Fed meeting this week and while many folks believe there will not be a cut this time around, some still think the FOMC needs to be aggressive in cutting the overnight lending rate. The top of the list for this request would be President Trump, who seems to believe low rates are the elixir for the economy.
I’m afraid that is not true nor how it works. It is very likely the committee will not only stand pat this week but in June forecast even FEWER hikes (currently 2) for 2025.
Positive breadth is the only good thing to say about up/down issues. That pretty much means the stock market is stalling here and may be ready to flip lower any day now. For the time being we’ll give the bulls the benefit of the doubt considering breadth is still on a buy signal. Yet, the weakness seen over the past week or so could be considered a red flag warning.
Considering Tuesday’s turnover was extremely low we look at yesterday’s volume higher as a non-impact event. Why is that? Well, we would have liked to see some powerful volume trends arise following that large moves lower the last couple of sessions. We did have quite a bit of volatility yesterday (realized) as the VIX traveled lower. We continue to feel the pressure from an uncertain outcome with tariffs and thus the economy.
A pretty wide range yesterday which was an outside day but again a doji, which tells us trader/investor indecision. Interesting much of the biggest moves yesterday came following the Fed statement, up and down. We continue to see support at the 50 day moving average on most indices. News seems to be driving market action and that makes for erratic price moves.
The Internals
What’s it mean?
It’s tough to get some upside momentum going when the internals are just not cooperating. That was the case yesterday as stocks were up and down in a big way but the internals floundered. Look at the VOLD and ADD, just weak as can be though VIX had a wild session. TICKS were moderate but mostly red on the day, put/call still heading lower while the ADSPD did reflect some strength.
The Dynamite
Economic Data:
- Thursday:Jobless claims, productivity, inventories
- Friday:Lots of Fedspeak
Earnings this week:
- Thursday:PTON, SHOP, COP, HUT, CROX, LNG, TTD, COIN, MARA, MELI, NET, SOUN, DKNG, AFRM, WOLF
- Friday:WULF, ENG, ANI, TLS, PAR, AGN, ESNT, GOGO
Fed Watch:
We have the third Federal Reserve meeting of the year and the futures market is not expecting rates to budge at all. The data still tells the committee the economy is running strong and there is a hint of price instability with coming tariffs. If that goes away the narrative may shift to a more accommodative Fed, but maybe later in the year. Lots of Fed speak on Friday and the Powell press conference on Wednesday.
Stocks to Watch
VIX — With some news behind us and some potential resolution to trade issues the VIX has come down sharply, nearly 22% and is looking to break 20 this week. If so, that lines up more upside.
SPX 500 – With a strong start to May the index finds itself on a nice day winning streak, something that is quite rare. The indices are overbought and due for a corrective phase, when it happens is anyone’s guess but you should be ready for it.
China Trade – Will there be a deal between the US and China? The stalemate continues but word has it both sides want to make an agreement before economic disaster happens. We may know more in the weeks ahead but the news cycle is accelerating quickly.
