The Fuse
Equity futures are getting roughed up this morning after some decent selling on Monday and followthrough last night. Commodities continue to rise as now the worry is about higher inflation becoming a problem. We’ll see if there is a turnaround Tuesday, but the market needs some heavy lifting to maket that happen.
Interest Rates are on the move again as bond sellers continue to lead the way. Yields are up sharply since the first rate cut in three years, but there is good reason for the committee to rein in those cuts and move at a more measured pace. Fed futures see it differently and that is likely to cause some more selling until the two get on the same page. Yesterday the 2 yr bounced above 4%, a sharp move. Gold also strong.
Stocks in Europe were flat overnight, the dollar fell modestly while the German 10 yr bund yield rose 3bps, which is helping to lead a selloff in fixed income. Gold is higher again, new highs above 2,750 per ounce, crude oil is steady above $70 per barrel. In Asia Japan declined sharply, down 1.4% in a volatile session while Shanghai was up modestly and Hong Kong was flat.
Earnings last night from SAP were terrific, the stock is up strongly this morning. Also today very good numbers from GM, MMM and GE, most of those names are higher as well (strong guidance). Tonight we’ll hear from Enphase, Seagate, Baker Hughes and tomorrow am Vertiv, Boeing, Coke, T, CME and General Dynamics.
Stocks took a breather on Monday, heading lower after some strength at the end of last week. Weakness is typical following an expiration Friday, we’ll see if the bulls come to play when a slew of earnings hit the pavement. The big drop on Monday was bought by the dip buyers, and while it was a still a negative session this sets up for some better action later in the week.
Very poor breadth for a second straight day now raises some concerns. Oscillators went lower, the Nasdaq is near the zero line while NYSE is decisively negative. Last week’s surge barely pushed this indicator green, and now it has shifted gears. Can we see a turn? Absolutely, the trend is bullish and seasonal trends are positive. New highs continue to crush the lows.
Turnover was less that Friday, hence not a day of distribution. However, the price action was horrid all day, especially in the Dow Industrials. But, there are few of its components reporting this morning, and later in the week, we’ll see if that matters. Earnings are the big focus now. If there is a strong price day on good volume that will be a good start.
The SPX 500 is trying to probe the 5,800 level now to make sure it is firm. If so, the market can launch another assault. In most instances, the stock market is not overbought but needs to find buyers in a hurry. The Nasdaq seems to want to test the 20K level again, we’ll see how well it holds.
The Internals
What’s it mean?
The hunt for a Red October continues, and more days like Monday will accomplish that feat. Stocks were punished all day before a late buy program sliced through those losses, but the internals were roughed up. Ticks in Nasdaq were hella red, only 2 green arrows! VOLD straight down, the ADD also plunged as more worry, uncertainty and doubt permeate. Tuesday is a chance to right the ship.
The Dynamite
Economic Data:
- 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:
- 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.
