The Fuse
Equity futures are modestly higher this morning, trying to make is three in a row. Market volatility is subdued as it seems traders are now in holiday mode. That could. be dangerous, especially if liquidity is not flowing (money flows) as it normally does. Earnings tonight will be a catalyst for the next leg up or down.
Interest Rates are rising a bit as the 10 year yield found support yesterday at the 20 ma, or 4.332%. That bounce seems firm but we would need to see another day higher, then perhaps another run to the vaunted 4.5% area, where the Fed funds rate lives. The 2 yr also hovers close by at 4.29%. Fed futures gained some ground for a rate cut in December, now a 59% probability but plenty of data to show before the next meeting.
With equity futures pushing higher this morning we see stocks gained nice ground in Europe, higher by .6%. France and Germany also gained the same amount. Gold is about flat while crude is moving back towards $70 per barrel. The German 10 yr bund yield rose a bit (1 bp), 10 yr treasury also higher by 2bps. In Asis Japan was slightly lower while Hong Kong and Shanghai were up modestly.
Earnings last night from Powell were good but not quite enough to lift the stock higher. This morning a surprising miss from Target Stores but a strong report from Wix is pushing that stock higher. Later this morning we’ll have TJX and Williams Sonoma, tonight the big one with NVIDIA, Palo Alto Networks and Snowflake.
Stocks had a better day Tuesday, save for the Industrials which found themselves much weaker all session. You couldn’t blame Walmart, Amazon or NVIDIA though, they were the best performers all session for the Dow 30. As it stands, the SPX 500 is right near a breakout level, and with some momentum we could see a nice run higher and take out last Friday’s huge losses.
Breadth was weak today, which is somewhat concerning as the markets were mostly higher on the day. Oscillators remain in negative territory, so with those readings the market remains vulnerable to a downside move. New highs are still pushing against new lows, that indicator remains on a buy signal. We have to be careful here lest the market gets too oversold, that could create a bearish divergence with price action.
SPX 500 put in a nice accumulation day, but the Industrials did the opposite, closing down with higher volume. The only respite would be to say the Industrials finished above well their lows of the session. Turnover was weak on the QQQ and small caps, that indicates some complacency when these indices are higher.
Could we see a bit more turnover this week after the NVIDIA earnings tonight? Without question!
It is too bad more traders/investors don’t pay attention to what happens in the pre-market trading environment. With a better than 1% loss during the pre-market, bargain hunters stepped in and bought the dip, and the low of the session was on the opening print (it was still down). Stocks continue to flirt with some lower levels but as they move sideways the moving averages are catching up quickly. It appears the indices are lining up for a big end of year finish.
The Internals
What’s it mean?
Another positive session for the SPX 500 and Nasdaq, but notice the poor ADD, finished at the highs of the day but below zero. That is telling, the VOLD barely at the zero line. There just is not any momentum outside of a few names. Look at the ticks, which were evenly distributed even though the markets were higher.
That tells us sellers are actively distributing stocks under the hood. Put/calls on the rise still, the VIX may take a leg lower this week.
The Dynamite
Economic Data:
- Wednesday:n/a
- Thursday:Jobless claims, philly fed, existing home sales, fedspeak
- Friday:SPX services flash PMI, flash manufacturing PMI, consumer sentiment
Earnings this week:
- Wednesday:NIO, TGT, ZIM, TJX, WIX, DY, WSM, NVDA, SNOW, PANW, JACK, CCH, CG
- Thursday:BIDU, BJ, DE, WMG, SCVL, INTU, ESTC, GAP, ROST, NTAP, CPRT
- Friday:GB
Fed Watch:
If last week’s subdued response by Chair Powell about future rate cuts did not sway you, then I’m sure the move in Fed Funds Futures probably did. The excitement over rate cuts has quieted down a bit from a month ago. The futures market may now only be pricing in 2-3 cuts in 2025, and only a 62% chance for a cut in December. That number is getting smaller, and if there is some good strength in the November jobs report that may end up going to zero. Powell certainly delivered a message.
Stocks to Watch
NVIDIA – The big chip company reports earnings on Wednesday, it will no doubt be a market mover.
Tesla – Elon Musk’s company has ripped higher since the election and continues to move ahead, nearing new highs. The consensus is the election of Trump will be favorable to Elon and his EV company.
Interest Rates – Yields on the long end of the curve have been on the rise since the Fed’s first rate cut decision in September. 4.5% seems to be the level that traders are looking at on the 10 year, we’ll see if that gets penetrated soon.
