The Fuse
Equity futures are mixed today as the Dow Industrials show some green but the Nasdaq and SPX 500 are in the red. Pretty decent earnings beats for the most part but the macro still remains challenging.
Interest Rates are on the rise again today which could knee cap any stock market gains. The equity market has been battling with the bond market as bond sellers keep driving interest rates up. Any close for the 10 year above 5% (which could happen Thursday with a high GDP print) is a negative for stocks.
Crude oil is up slightly while gold and silver are mostly flat. It’s all about earnings here the next couple of weeks and the the last trading week in October. Can the bulls pull this out for a winning month, first one since July?
Several earnings are out this morning including a modest beat for Boeing. ADP beat on the bottom line but missed on revenues, last night saw a big move in Microsoft as the company beat handily, while Alphabet beat top/bottom line but their cloud revenue came in a bit soft. Later today we’ll have Meta, IBM, ServiceNow, KLAC and Align.
A big week of earnings coming up and the GDP report for Q3, which may show some very strong growth in the quarter.
Breadth finally came through on the positive side of the ledger, but we’ll have to see if there is to be more buying later today and then later in the week. We have had a hard time finding consecutively strong breadth days since late August. Until that changes to the positive any rally is a selling opportunity.
Volume was actually LOWER than it was Monday, hence that raises some skepticism to if the market has really shifted gears to the upside. However, a few more up sessions would build some positive momentum, but for now the indices are in correction mode.
A solid gap up and close above the 200 ma for the SPX 500, now needs some upside followthrough. No doubt the indices were deeply oversold and there was plenty of tinder to light a fuse and rally the markets higher. But, as always that needs some confirmation. If not, the next move down could be a steep one.
The Internals
What’s it mean?
Finally a bullish day for the internals. Certainly there have been several down sessions this month and while the market gets beaten up the time towards the end of the year is closer, which means potentially more selling. But yesterday, the VOLD was strong and look at the drop in the put/call ratio, very bullish. Ticks were strong and green all day long, while the VIX took a bullish tumble. More to come? We’ll have to see over the next couple of sessions.
The Dynamite
Economic Data:
- Wednesday: Crude inventories, housing starts
- Thursday: Jobless claims, durable goods, 3Q GDP initial, pending home sales
- Friday: PCE price index September, Michigan Consumer Sentiment
Earnings this week:
- Wednesday: BA, GD, H, NSC, IBM, META, KLAC, EQIX, URI, WHR, PPC, LC
- Thursday: MO, AMT, BMY HOG, HAS, HSY HON, MA, KDP, NOC, UPS, VMC, AMZN, BJRI, SAM, CMG, DECK, DLR, F, INTC
- Friday: ABBV, AN, BAH, CHTR, CL, XOM, CVX, SWK, NWL
Fed Watch:
Probably a slower week of speakers this coming week after a barrage of Fed speak and a killer Q/A from Chair Powell. The Chairman was adamant about current monetary policy and state at least one time that ‘financial conditions were not tight enough’. That torpedoed the market, though he did say the committee could perhaps pass on a rate hike at the next meeting, yet he left the door open to raising rates in future meetings – as he should. We’ll update this week if there is more information from speakers, but after this week the Fed goes into a quiet period.
Issues/Stocks to Watch this Week
Microsoft – Earnings are out on Tuesday, and much has been made about their recent acquisition of Activision and their growth plans with cloud.
If you recall, last quarter they saw a slowdown in this growth and it hit the stock hard. If that is heard again, we may see another leg lower.
Volatility – VIX picked up this week as some fear is starting to permeate the markets. That may spill over this week, but a spike up in VIX and a fall down could lead to a nice rally, too.
Interest Rates – A spike above 5% for the 30 and 10 year were not pleasant news for the stock market. As a result, bond traders continues to sell bonds at a brisk pace and so does the Fed, who shed another 19 billion in bonds from their balance sheet.