The Fuse
Equity futures are rallying up this morning, trying to recover some of the big losses from Thursday’s drubbing. It is an eventful week with Tuesday’s election, more big earnings and the Fed meeting Wed/Thursday. It all adds up to volatile sessions.
Rates are falling sharply today on the long end of the curve, the 10 year really pushing downward. Some may attribute this toward safe haven buying in front of potential election chaos, but if there is some followthrough into the Fed meeting it would be good news for small caps and the like. Fed futures are predicting a cut at the conclusion of this week’s meeting. There is one more FOMC meeting for 2024 next month.
Stocks in Europe were flat overnight but the dollar dropped sharply, down about .5%. Crude oil is up more than 2 bucks as OPEC+ stated they would continue cutting oil supplies. Gold modestly higher as is silver. In Japan markets were closed, Hong Kong was up a big while Shanghai rallied 1.2%>. German bund yields (10 year) were up 1bp, treasury yields fell sharply, down 9 bps on the treasury bond rally.
Earnings are big this week with names like Palantir, ADM, SuperMicro, ARM, CVS, DraftKings and Block reporting. Many stocks that are on the schedule this week have strong chart patterns, so we’ll see if that continues to hold.
A couple of big events this week and we are not even talking about earnings. The election is finally here and the final poll will be made when voters cast their vote at their stations. We may/may not have a resolution but the event will be over. Thursday concludes the second to last Fed meeting of the year, the market sees a rate cut coming but December may be in doubt.
Breadth was poor again, something we have seen often over the last couple of weeks. We can blame that on the weakness in small caps, which are running cold thanks to heat on yields. The rise in the 2 and 10 year yields have been troublesome to small cap stocks, but if the Fed eases up this week we may see fixed income buyers stepping in on the oversold bond market.
Though stocks were mildly higher end of day the bigger turnover happened late in the day. Buyers just were not interested in piling into names after a good start, makes sense with some uncertainty next week. With a few big earnings out this week we might see some volume hit the tape, further a drop in volatility is expected to bring in some buyers from the sidelines.
Stocks hit some pretty low levels on Thursday and were due for a bounce, that happened Friday but still more selling. The market does not look great under the hood, and that could be a problem. The SPX now has support at 5,700 and then 5,650 While the Nasdaq retains support at 19,300. The Industrials had a big reversal Friday and if there is a lower high, lower low then the 40K level will be next up.
The Internals
What’s it mean?
Just another lousy session for the market internals, on what started off a promising day. Traders took the opportunity of an early up move to sell stocks. The VOLD has been miserable of late, check the top left box above. ADD also just straight down, the put/call rising and the VIX remains elevated. The ticks were mostly red, odd for an up session but masking the weakness of the market. Will the passing election get investors motivated for an end of year run?.
The Dynamite
Economic Data:
- Monday:Factory Orders
- Tuesday:ISM Services, trade deficit
- Wednesday:SPX final US services PMI
- Thursday:Jobless claims, productivity, FOMC rate decision, consumer credit, inventories
- Friday:Consumer sentiment
Earnings this week:
- Monday:MAR, CEG, FIS, FPET, PLTR, CLF, WYNN, NXPI, ILMN, GT
- Tuesday:MLCO, ADM, APO, RACE, BLDR, DVN, SMCI, MCHP, EXAS
- Wednesday:CELH, CVX, TEVA, TM, JCI, ARM, AMC, QCOM, ELF, APP, IONQ, CLOV
- Thursday:VSTR, GOLD, DDOG, HAL, HSY, MRNA, DKNG, ANET, SQ, RIVN, U, TTD, AFRM, FNET, PINS, ABNB
- Friday:SONY, IEP, FLR, NRG
Fed Watch:
Another Fed meeting is upon us and the Fed futures market predicts a cut after Thursday’s meeting. That is likely the case as the committee has no reason to disappoint the crowd, but debate about a December cut will certainly be heard. The job report Friday (poor) may be an anomaly, but if it is slowing that quickly a faster rate cut policy may be appropriate.
Stocks to Watch
Election – We have finally come to the day that can change the US. We should know how things turn out later in the week, the effects on the market and economy will be analyzed.
Federal Reserve – The seventh meeting of 2024 will take place this week, the committee is largely expected to cut rates once more, this time by .25%. That may not sound like much but with lower inflation it makes sense for the committee to bring down borrowing costs.
Earnings – It is another big week of earnings as the season comes into the halfway point. 1/3 of the SPX 500 reported last week and very little damage was felt. Many stocks reporting this week have strong chart patterns and formations, we’ll see if that continues to be the case.
