The Fuse
Equity futures are spinning downward this morning as the reality of a government shutdown continuing starts to get real. At this point it is the longest shutdown in history but the beat still goes on. The devastating effects are likely to hit in 2026, hopefully not leading to more inflation.
Interest Rates are sliding down this morning as fixed income investors start picking up some bargains. Stocks look to be a bit tired here so perhaps bond buyers are ready to go. The 2 yr is still trending lower and remains below the key 3.5% area. High yield remains strong, corporate spreads are tight and the fed funds see a cut coming next week. All good in bond land!
Stocks are heading south this morning with a bit of pressure on the futures, the STOXX was down .3% led down by France and Germany. FTSE was up though, higher by .5%. The US dollar index was flat, gold down again after a wipeout Tuesday, silver also down .5%. Crude oil is rallying nearly 2%. In Japan stocks were flat, Hong Kong fell 1% but Shanghai only down .1%. US 10 yr treasury yields down 1bp.
Earnings last night from Netflix were ‘good but not good enough’. The stock is being punished this morning but we’ll see what happens here later today. Strong earnings from Capital One and Intuitive Surgical have those names up higher, Texas Instruments getting clobbered. From this morning reports strong earnings from GE Vernova has that stock up about 2%, Hilton also beat as did Vertiv. Tonight we hear from IBM, Tesla, SAP and Lam Research, tomorrow am honeywell, Dow, AAL, Southwest.
Moderately volatile session with many of the recent high-flying momentum names taking a bit of a haircut. Some of the bigger industrials stepped up to the plate and delivered some strong earnings, like RTX, GM, GE and MMM. So much for the old, stodgy industrials! They powered up the Dow for a move above 47K, nearly closing above that level. We could see a move to 50K before the end of the year, that is less than 6% in just over 2 months time./span>
Breadth was positive but stalled out end of day, but that has been the pattern of late, strong volume followed up by weaker advance/decline line. As we move into the closing months of the year look for more erratic price action even as the seasonal trends are bullish. Oscillators still in positive territory and not overbought.
Even weaker turnover yesterday than Monday’s session, so there is a concern here that a lack of conviction is going to prevail. What does that mean exactly? Well, it won’t take much volume to the downside to knock this market over. If earnings are not trending upward and giving the market an excuse to rise, the opposite will happen and volatility will start to rise again.
A tight consolidation might be what we have going now, and that could be a good situation. After all, October has been a strong month, not very big but positive enough that the indices have been making new highs. Good stuff still for the bulls, but a pullback to short term averages like the 10 day would not be out of the question.
The Internals
What’s it mean?
That VOLD and ADD were just pathetic yesterday. Look at the rollover, no energy whatsoever. VIX did decline and that kept the market from getting trounced, but the TICKS were mostly red and showed heavy sell programs. So far earnings season is not off to a great start, put/calls are steady though. Maybe the bulls wake up later in the week.
The Dynamite
Economic Data:
- Wednesday:Fed speaker
- Thursday:jobless claims, existing home sales, fedspeak
- Friday:CPI, SPX PMI, sentiment final
Earnings this week:
- Wednesday:APH, GEV, VRT, BSX. HLT, T, TMHC, TECK, TMO, WGO, TSLA, IBM, KMI, QS, SAP, AA, LRCX
- Thursday:AAL, DOW, HON, HAS, NOK, DOV, LUV, AN, TMUS, INTC NEM, ALK, NXT, DECK, BYD, F
- Friday:PG, GNTX, FLG, ITW, GD, HCA, VRTS
Fed Watch:
With the lack of data from the government the Fed finds itself in a quandary. Do they trust the own tools and make the assumption that inflation is not running rampant and the labor market is indeed slowing, or do they take a more cautious approach. Governor Waller seemed to believe the latter, we’ll hear from him this week along with Miki Bowman. Next fed meeting is coming up in about a week.
Stocks to Watch
Netflix – For all of its controversy, this company just continues to execute on their plan and deliver for shareholders. Expectations are somewhat high but that has never stopped Netflix in the past from beating and guiding higher.
IBM – Big blue has been on a roll lately and continues to surge higher as a non-AI play. We’ll find out more in the earnings call this week.
Industrials – A big week for the Dow as many names will report earnings this week and even more next week. With the index about 1% below all-time highs a surg through there might signal 50K is next up.
