The Fuse
Stocks are a bit weak this morning after overseas markets were lower. A big week of earnings this week as the market gets set up for a big finish to end the year on a positive note.
Interest Rates are higher again as the 20 year and 10 year are pushing higher. This may put the clamps on small cap stocks, but currently bonds are trading in a band. Fed futures still see two cuts in 2024 but more aggressive in 2025. We’ll hear from a couple of Fed speakers who may influence yields later today.
Stocks in Europe were flat overnight, the dollar did climb a bit while gold is moving higher once again. We are seeing strength in other commodities like silver and crude, too. German bund yields (10 year) climbed, while stocks in Asia were mixed, Japan down slightly, Hong Kong down a sharp 1.5% but Shanghai up modestly.
Earnings are big this week, starting with SAP tonight and Nucor, then tomorrow with 3M, GM, RTX and GE along with LMT and Sherwin Williams.
A plethora of earnings out this week in various sectors will give us a nice glimpse of business going forward. If the first two weeks were the appetizer then the bulls are going to enjoy the rest of the meal. Banks, some tech and other sectors delivered some strong earnings that are working to support the lofty market multiple, which is tipping towards 24x earnings.
Poor breadth but still positive, the Russell 2K was a bit disappointing and was the reason for weakness. Rates climbed a bit and that was probably the issue, but we could see that reverse this week. Breadth is still on a buy signal. Oscillators are now both green, new highs are swamping new lows.
Volume levels were elevated Friday, it was the October expiration and that triggers exercising of options. Given the fact price action was strong that is meaningful to the continuation of the trend, which is up. We should expect to see a drop off in volume early in the week but then a surge as we approach end of the month.
As the moving averages rise up to meet price we can slap new support levels below in case the market decides to correct. The Nasdaq has good support at 20K, which is right near the 20 day moving average. That should hold firm and attract dip buyers if it should come to pass. Short term support at 5,767 for the SPX 500 is the 20 day moving average as well, a 2% drop below current levels should be bought by those same dip buyers.
The Internals
What’s it mean?
A pretty quiet day according to the internals. Stocks were up, the Nasdaq finished strong but the ADD was down and nearly flat on the day,, put/calls were about even while the ticks were evenly distributed. Plenty of buy and sell programs all day long. The VOLD however did finish strong and picked up the pace late afternoon, some buyers coming in to cover positions on expiration Friday. Only nine trading days left in October!
The Dynamite
Economic Data:
- Monday:Leading economic indicators, FedSpeak
- Tuesday:Fed speak – Philly Fed Harker
- Wednesday:Miki Bowman (Fed), Beige book, existing home sales
- Thursday:Jobless claims, SPX flash PMI, New home sales, Beth Hammack (fed)
- Friday:Durable goods, consumer sentiment
Earnings this week:
- Monday:SAP, NUE, LOGI, ZION
- Tuesday:MMM, GE, RTX, GM, VZ, LMT, SHW, STX, ENPH, BKR, TXN, NBR, PFSI
- Wednesday:VRT, BA, T, KO, NEE, GEV, TMO, CME, BSX, GD, TSLA, LRCX, IBM, CLS, NEM, NOW, VKTX, TMUS LVS
- Thursday:AAL, LUV, UPS, NDAQ, CARR, TSCO, UNP, OSIS, DXCM, DECK, WDC, SKX, TXRH
- Friday:NYCB, PIPR, WT, NWL, CNC, BAH, AON
Fed Watch:
Fed speak is slowing down from the recent pace, we are nearing the next Fed meeting, which is in a couple of weeks. Much of the concern is this meeting follows the election, which some are predicting could be chaotic. I don’t expect any of the Fed speakers to pour gas on the fire, in fact the data says they should continue a slower pace of rate cuts going forward.
Stocks/Issues to Watch
Earnings – It’s a big week of earnings with several Dow Industrial components reporting, which includes MMM, IBM, RTX and others.
If these companies guide well it should be more new highs for the Industrials.
Tesla – Reporting their quarter on Wednesday evening, Tesla stock has been acting poorly. As such, playing for a big move is tricky, options already are pricing in a large move.
Gold, Silver, Bitcoin – The yellow metal closed at another new all-time high Friday, a close well over 2,700 per ounce. Silver is moving strong with gold, that metal is firmly above $30 per ounce. It is no surprise metals are moving with Bitcoin, which continues to march towards all-time highs and perhaps the 100K level.
