The Fuse
Equity futures are trying to followthrough on yesterday’s very solid session. However, there is some data to contend with, the September CPI will be released at 830am EST and could present the markets with some volatility.
Interest Rates are slightly higher as the markets await the latest CPI reading. Market volatility is down a bit but if the number is good expect to see that tumble. Bond volatility is muted, the 2 yr is steady as is the 10 yr treasury. High yield remains strong while fed futures see a 97% chance of a cut next week.
Stocks in Europe gained a fraction, up .3% on the STOXX while FTSE picked up .1%. The dollar index was flat, gold is getting hit again with more volatility, down nearly 2%, silver down more than 2%. Crude oil firmly above $60. Bond yields in US and Germany are steady, Japan climbed, rising 1.4% as Hong Kong and Shanghai both up .7% on volume.
Earnings last night from Intel were very strong, a beat and raise on the bottom and top line, stock is up about 8% today. Also strong earnings from Ford and Newmont. This morning a nice beat rom HCA, solid wins from P&G along with General Dynamics.
Finally a day when everything came together! Stocks rallied from the start and never really looked back, the indices with a robust move all around. Even the small caps rallied and now are primed and ready to break higher to record territory. Other indices are close but it was a pleasant surprise that stocks did not followthrough to the downside. Seasonal trends are taking over and the bulls smell more upside./span>
Solid breadth on the day, not a huge rout but good enough to win the day. A 2-1 positive day is strong but of course more followthrough would be even better. This being a Friday don’t count on too much strength unless there is news driving the bus. Oscillators back to even again, new highs are still crushing new lows as that indicator is still on a buy.
Wednesday’s high volume selling was a warning flag, but then we had an up session – so all is right again? Not so fast, but if today is a strong volume session (highly unlikely on a Friday) then we could get even more bullish. Turns out some earnings last night were strong (INTEL), and that might be a driver of money flows into the market. Certainly some excitement with a summit announced between the US and China next week, we’ll have to see how it turns out.
Perhaps that low yesterday was good enough to serve as support for the markets. No question the tumble on higher volume was a big scary, but then we are at higher levels now and that means big moves if volatility is elevated. We saw the VIX come down sharply yesterday and that means market players are complacent, but the fear/greed index continues to portray fear – not common when the indices are near highs. Can you say ‘wall of worry’ is up?
The Internals
What’s it mean?
The wishy/washy action continues, this time the bulls got the better of it. Very strong VOLD action, it finished at the highs of the day and pretty good ADD and ADSPD, but not lights out. VIX was smashed, and the TICKS were mostly green all day, lots of buy programs hitting the tape. Put/calls remained low. As always, followthrough is key.
The Dynamite
Economic Data:
- Friday:CPI, SPX PMI, sentiment final
Earnings this week:
- 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.
