The Fuse
Equity futures are marching higher this morning trying to make it four straight up sessions and nearly wipe out all of last week’s losses.
It doesn’t take much to nudge the bulls these days, and with a correction underway it appears a move above some stiff resistance will turn that situation around quickly.
Interest Rates are down on the long end of the curve as they continue their decline following the Fed policy statement. The committee kept rates steady and hinted they may be finished for this cycle but left the door open to more hikes if they do not see needed improvement in inflationary trends.
Overnight, European manufacturing came mostly in line and is still in contraction mode, while Germany’s unemployment remained steady. Jamie Dimon from JP Morgan believes the Fed may not be done raising interest rates. President Biden asked for a pause in the Middle East conflict in order to exchange/handle hostage situations.
Solid earnings last night from Roku and ELF along with Qualcomm and MercadoLibre. AirBnB gave soft guidance while Etsy disappointed, but Electronic Arts beat and offered decent guidance. Starbucks and Palantir with a nice beat this am, Lilly warning about future earnings to the downside.
The Fed did their thing and as expected passed on moving interest rates. The Chairman was still hawkish and simply laid out the same strategy as the prior meetings, which was being flexible with rates. The committee still believes a higher for longer scenario is more than likely.
The early part of the day had lousy breadth but as the session wore on there was some improvement, especially during the Powell press conference. Rates came in and equities rallied off that move, good breadth to finishe the day 2-1 positive.
Better volume later in the day but for it was lackluster for the most part. With a jobs report coming Friday we could see turnover really start to come, the first day of November was pretty strong overall. QQQ and DIA registered accumulation days.
One more day of the seasonally strongest week of the year, and so far up about 3%. Not bad, and with the SPX 500 closing well enough above 4200 yesterday we can see a run to 4,300 before a stall. The 20 ma is currently at 4,270 so that’ll be first up as strong resistance. Downside is still 4,100. The index is up against the 200 ma and well below the 50 ma, so it is still in corrective mode.
The Internals
What’s it mean?
The bears were determined to get a push down after a 2 1/2% move up early in the week but it was not to be. In the pre-market futures were lower until the refunding announcement (treasury) and it was mild, so the bulls had some running room. The VOLD started slow but finished very strong, VIX was smashed and was lower all session long. TICKS were green most of the session and and very sharp move up in put/call has us a bit worried.
The Dynamite
Economic Data:
- Thursday: Jobless claims, productivity/unit labor costs, factory orders
- Friday: NFP employment report, Global final PMI, ISM, non-manufacturing index
Earnings this week:
- Thursday: COP, CROX, CMI, CYBR, LLY, RACE, K, MAR, TAP, PZZA, PH, SHOP,SBUX, WEN, AAPL, SQ, CRUS, NET, FTNT, MSI, SWKS, OLED, WW
- Friday: AMC, AXL, CAH, DOC
Fed Watch:
The second to last Fed meeting of the year is upon us and there is a strong likelihood the committee will pass on hikes this time around. However, we want to listen to the committee carefully to see if they are intent at continuing rate hikes. The data this past week showed inflation was still a problem and still rising higher. Tuesday/Wednesday is the Fed meeting.
Issues/Stocks to Watch
Apple – The biggest company in the world will release earnings on Thursday, everyone will be watching/waiting with great anticipation. The stock chart is horrible at this point after a severe 20% correction. Will good earnings change that and turn the chart bullish again?
Federal Reserve – It’s time for another interest rate policy decision, the committee is likely to pass on a hike this week but will continue to keep the door open for more hikes. Last week’s inflation numbers were not Fed friendly. I expect to hear the Chairman and the committee reiterate their commitment to snuff out inflation and do whatever it takes. As Powell once said, ‘there is going to be pain’.
Interest Rates – Will the news releases this coming week help to bring bond buyers back or will the 10 year finally get a week over the 5% level and stay there for awhile?