The Fuse
Equities are again soft this morning following news last night of an e coli outbreak from McDonalds’ burgers. That is hitting the Industrials hard, but also weakness in several tech/semiconductor names are putting pressure on the indices.
We should see some relief later in the week but for now the bears have some control.
Interest Rates are up again for a third straight day as bond sellers remain in control. Since the Fed cut rates a month ago the long end of the curve has backed up, the 2 year back above 4%. Fed futures are still betting on a rate cut at the next weekend but only a 2/3 chance in December.
Stocks across the pond were up .2% (Europe), the dollar also climbed sharply, up .3%. Crude drop about 2% but gold is sporting a new high. German 10 yr bunds are down 1bp, stocks in Asia were mixed with Japan down .8% but stocks in China and Hong Kong were higher.
Earnings were in line for STX last night, strong guidance from TXN but a miss and guide down for Enphase.
This morning a nice beat for Coke and T, while Vertiv beat and raised. Tonight we’ll hear from Tesla, IBM, ServiceNow, Celestica and Lam Research.
Another mostly down session for stocks as the hammer just keeps hitting the nail on the head. Not much relief yet though tech stocks show some strength most of the session, Microsoft being a standout performer. It is difficult to imagine this market falling apart, but with so many uncertainties like election and earnings on the short term horizon there is a battle going on with bullish seasonal trends.
Another poor day of breadth puts this indicator in the penalty box, a bearish signal. That’s not a surprise, frankly this indicator has been flip flopping back and forth. Oscillators though are now red and bearish for now, New highs are crushing new lows, this indicator remains bullish.
Lower volume when the market is down means there is less pressure by big institutions, but there has been some notable damage. The recent highs were not eclipsed and while volume has subsided, it will take a big reversal to turn the tide. That is not something to be relied up, but then this bull market run has most people scratching their heads.
More testing of lower levels and so far it has been successful, until it is not. Stocks continue to find buyers at lower prices, but with poor breadth and mediocre turnover it simply means traders won’t be staying for long. Liquidity has also be rather poor, which means price moves are erratic. Regardless, lower levels are in the cards if stocks fail to hold some short term support.
The Internals
What’s it mean?
Another lousy session for the internals. VOLD barely moved, not even a reflex after Monday’s drubbing.
ADD made its way higher, but ticks were pretty dominant on the red side of the ledger. VIX did close lower on the day but started higher, ADSPD made a run late. All told, just a blah session.
The Dynamite
Economic Data:
- 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:
- 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.
