The Fuse
Equity futures are backing away this morning, the first trading day of October. As predicted, the government shut down at midnight and there seems to be no path to getting the dispute resolved quickly. Business rolls on but there will be some problems going forward.
Interest Rates are popping higher this morning as worries about the shutdown force bond holders to do some selling. The thinking here is it could lead to a slowdown (faster) or even some inflation down the road. Junk yields are tight but widening a bit, the 2 yr yield is rising. Fed funds are steady.
With the world watching the US and the government shutdown, we could see more worries from overseas. But last night STOXX was up slightly, FTSE added .3%. The US dollar index fell .2%, gold was at record highs above 3,900 per ounce, silver is moving in on $50, currently at 47.38. Crude oil is slipping. Stocks in Asia were lower, Japan pff .8% but markets in China/Hong Kong were closed. German bund yields up 3 bps, US 10 yr treasury yields up 1bp.
Paychex with good earnings and guidance, last night Nike beat watered down estimates and offered moderately higher guidance.
It looked like turnaround tuesday was going to be the mantra yesterday but a late day buying surge nixed that idea. Stocks were up nicely by the close but following the end of real time hours futures did sell off quite a bit, maybe just some marking up before the end of the month/quarter. We’ll see today how the markets handle the earnings beat from Nike and the ADP report due out before the open.
Breadth remains poor, but with a positive day the selling from the the prior sessions seems to have ended. A new month often brings in new money flows, and with some big news with jobs data this week and a moderately elevated VIX, we could see the bulls take the ball here and trample all over the bears.
Let’s give the bulls a hand! With poor price action for 2/3 of the session they finally made a move and pushed the indices higher. Lots of volume hit early on and that was the selling variety, but the dip buyers stepped in and really got busy. A nearly 1% intraday swing fell in favor of the bulls, and now with a successful test on higher volume and a spike higher the following day, the ball is in the bulls’ court.
A pretty strong month of September, especially when many were expecting it to be difficult. There were a few down sessions however but nothing too damaging, volatility remains very well contained. A recent test of shorter term moving averages appears to be a success, and while we still have a jobs report to deal with on Friday the probabilities now favor higher prices ahead.
The Internals
What’s it mean?
It’s getting tiresome to reflect on the poor internals each day. We cannot seem to get better statistics, unfortunately that is going to be painful for the bulls down the road. Ticks were heavy red even as the markets rose up, that is is a divergence to be taken seriously. Breadth did get a bit better, VOLD and ADD were positive, barely. TRIN rose up, the VIX started higher but ended near lows of the session.
The Dynamite
Economic Data:
- Wednesday:ADP, construction spending, ISM, PMI final, auto sales
- Thursday:jobless claims, factory orders, Lori Logan (dallas)
- Friday:Sept NFP, wages, service PMI, ISM, Philip Jefferson
Earnings this week:
- Wednesday:CAG, RPM, RZLV
- Thursday:ANGO
- Friday:N/A
Fed Watch:
We had several fed speakers out last week talking about fed policy and the economy. Most of them tipped their hands to show where they stood on the last policy meeting, which ended with a rate cut. The committee sees a couple more cuts coming this year and slowing down the pace considerably in 2026. The jobs report this week will be watched carefully, but it seems even if it is weak then two cuts may still be right. Chair Powell this past week mentioned stock prices perhaps being a bit high.
Stocks to Watch
Banks – The financials had a pretty nice week considering the markets were lower. Perhaps they are setting up bullishly before reporting in a few weeks, that makes sense.
AI – Stocks have been all over the place as the AI revolution rages on. However, the main catalysts are not there for a month or so unless some shocking news hits the tape. The big names may be entering into a consolidation phase for a bit.
Gold and Oil – Gold has been a big winner so far in 2025, but crude is also on the rise. Further, refiners have started to run hard and that may lead to higher gas prices eventually. This group finally found some love this last week.
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