The Fuse
Equity futures are down this morning as concerns over the conflict in the Middle East takes center stage. That was the chief reason for weakness yesterday and if it spills over we could have a followthrough day. At some point this week the attention will turn to jobs, and that may spark a big rally by Friday.
Interest Rates are rising a bit this morning as fixed income buyers take some profits following yesterday’s bond rally. The 2 year is hedged in at 3.6%, a level the market believes fed futures will be at in 2026. The futures market sees a cut in November and is 50/50 on two cuts in December. Friday’s labor report will go a long way in determining the size and scope.
Even as the US markets fell hard there was a decent rally in Europe, higher by .2% with energy names strong overseas. Gold is backing away from $2,700 per ounce but crude oil is ripping higher again, above $72. That is a key level, above there stokes a rally towards $85. The dollar was flat, German bund yields are up, Japan fell 2.2% while Hong Kong saw a powerful 5.5% rally, Shanghai was closed.
Earnings from Nike beat a lowered earnings bar but revenue missed again, the stock is being punished one more time after saying holiday sales are looking poor. Tonight we’ll hear from Levi’s, tomorrow from Constellation Brands.
We have now had three rough starts to a new month in a row. That is a disturbing pattern of dissent, but of course we still need to see how the rest of the month plays out. Remember, August and September started poorly but still finished in the plus column. Yesterday had a different feel though, driven by warring factions in the Middle East. This won’t likely play out for too much longer, but it was unsettling, to say the least following Monday’s very strong session.
Poor breadth but not a washout and it did not signal a bearish outcome. Oscillators are back in negative territory though and could be oversold within days. New highs continue to achieve higher ground, and that means markets remain bullish until further notice.
A strong volume day on the first trading day of October, some investors took chips off the table. It makes sense after a strong finish in September, but if we see more high volume down days we risk adding up some distribution days. That simply means big institutional selling is happening and could lead to some heavy down days.
Finally another day where support could be tested. The SPX 500 landed right near the lows from Monday, slightly above 5,700 but if that fails we have good support at 5,670 on the index, but some lower levels at 5,550 and then 5,500 if the sellers take control. The Nasdaq is in a worse spot, the 20 ma looks destined to be tested at 19,450.
The Internals
What’s it mean?
The internals were not horrendous, frankly energy, some tech and metals held them up pretty well. The VOLD was lower but again not miserably, ADSPD was much lower early in the session but did rally back some, VIX climbed but the ticks were fairly distributed, the red ticks on Nasdaq dominated. This means some more downside could be ahead for today.
The Dynamite
Economic Data:
- Wednesday:ADP, more Fed speak
- Thursday:Jobless claims, ISM, services PMI, more fed speak
- Friday:Jobs report, NY Fed President
Earnings this week:
- Wednesday:RPM, CAG, LEVI
- Thursday:STZ, ANGO
- Friday:APOG
Fed Watch:
This has to be a record week for Fedspeak. No less than 13 speeches/opening remarks from everyone on the FOMC committee. That includes Chair Powell on Monday. This past week had several speakers as well as Powell but they did no harm. This week’s labor report is likely to cause a bit of indigestion for some.
Stocks to Watch
Gold – Last week saw the metal close above 2,700 per ounce, gold is on a roll in 2024. It can continue, perhaps towards 2,800 by year end.
China – Stocks from China have been very hot and moving sharply higher of late following some stimulus measures in the country. We’ll see if that continues or if a pullback is seen.
Energy – We have seen oil prices pulling back from the $70 per barrel level amid OPEC+ officials saying they plan to push more oil onto the market.
