The Fuse
ES futures are pulling back this morning following the terrific earnings from NVIDIA and decent guidance. The stock is down however and is a drag on the indices, but we may see that change during the real time hours. Lots of Fed speak today and some important economic data, too.
Interest Rates are slightly lower as bond buyers see a few bargains in their sights. The 2 yr yield moved up yesterday and stands at 4.33%, just below the Fed Funds rate. If we see this yield moving up past 4.5% the Fed is more than likely slowing down even further on rate cuts. Perhaps the 2 year is helping the Fed find the neutral rate. Odds of a rate cut next month remains at 55% in favor, but only two more cuts in 2025 are being priced in.
Stocks overseas were mixed with the European STOXX down slightly, off .1% while in Asia Japan fell .9%, Hong Kong off .5% but Shanghai eked out a win. Gold is higher by nearly 1%, crude up by nearly 2% on geopolitical saber rattling. The dollar dropped .1%, German 10 yr bund yields climbed 1bp while the 10 yr US treasury yield was flat.
Earnings from NVIDIA last night were outstanding, the stock though selling off a bit on some profit taking. We may see the stock push higher later in the week. Palo Alto beat but not by enough, that stock is down about 5%, Snowflake is ripping higher on a beat, Baidu and PDD are modestly lower after beating expectations.
It was only a modest gain for the SPX 500 but a gain nonetheless. Pressure was mounting on this index and others from the opening bell but the bulls found their low in the first hour and bounced back to close in the positive. We saw good strength finally in the Industrials, which packed a nice punch, rising up better than 139 points on the session. With the news from NVIDIA earnings out in the open we’ll see if the pop in volatility from yesterday gets sold down.
Much like Tuesday the breadth numbers started poorly but ended better than feared. The decliners barely beat the advancers, which keeps the oscillator in negative territory. The A/D line has been week, this has been noted frequently below with the internals. The ADD line remaiins poor, even a positive showing last week for one day tells us how weak this indicator truly is, and eventually will bite the markets.
We’ll call it an accumulation day for the Industrials and even the Nasdaq, but the SPY just missed out. Regardless, the price action has been spotty this week and so has the volume trend, which is now in the neutral camp. The SPX 500 lives above 5,900 but is struggling to find buyers to take the index back towards the 6k level. That could happen in a few weeks time, the seasonal trend re-asserting itself, we’ll have to see if some liquidity comes in to drive the buyers towards stocks.
Some more testing of lower levels but not nearly as deep as the pre-market on Tuesday. The dip was nearly 1% and was picked up by the dip buyers as they went after the big names in earnest. We still see the small caps as the key to markets moving higher. The last couple days saw the IWM testing the 20 moving average successfully, now if it can continue onward a new high might not be far off.
The Internals
What’s it mean?
More weakness in those internals, they are simply not cooperating with the indices. Notice the even ticks again, a slew of buy and sell programs all session long. The VOLD? ADD? Pathetic, nothing to be impressed about, the put/call did decline again and is making a lower low, that might interest the bulls, the VIX also rising up but closing at the lows of the session. Premium burner all the way around, what’s it going to take?
The Dynamite
Economic Data:
- Thursday:Jobless claims, philly fed, existing home sales, fedspeak
- Friday:SPX services flash PMI, flash manufacturing PMI, consumer sentiment
Earnings this week:
- 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.
 
