The Fuse
Equity futures are rallying early this morning as they try to tack on a win at the end of the week. Even the Dow Industrials are higher, this index has been bludgeoned this week, down about 2% on heavy volume following some disappointing earnings moves.
Interest Rates are slightly lower as bonds get a modest bid. The bond market has been a haven for selling recently with yields backing up above 4% across the term structure. Fed futures continue to see a strong push of 1.5-1.75 rate cut odds by the end of the year.
The next Fed meeting starts after Election Day.
Stoxx in Europe gave back some gains of the prior day, down .3% while in Asia the Hang Seng and Shanghai both gained ground. Stocks in Japan were down, the dollare was flat while gold has a mild pullback. Crude oil remains well-bid above $70. German 10 yr bund yields fell by 2bps, the US 10 yr treasury is now below 4.2%.
Earnings last night from Deckers and Skechers were stellar, both of those names rising in the pre-market. Dexcom continues to flounder, Western Digital surprised with a beat.
Tesla brought out all the excitement yesterday as it rose up smartly, more than 21% on the session. That is a huge move for this mega cap, and mostly stocks followed along with it until some sellers hit the button midday. Those sell programs were not damaging however, stocks did finish green (save for the Industrials, who were hit hard by IBM). There is little reason to believe the markets will make a big move before election day.
Breadth was positive but that is about the only good thing to say about it. Oscillators remain negative, and while it was a positive session the breadth indicator is still on a sell signal. That can flip of course, with a few more up sessions but the time for those to happen is getting short. New highs are barely beating out new lows, that is a yellow flag warning.
Turnover was weaker than the prior day, so the bulls staved off another day of distribution. Digestion of the previous trend continues, but the bulls would like to see less volume on the down days, which reflect less conviction from the sellers. We could however see volume pick up next week into the end of the month, in addition to big earnings releases.
A tight range yesterday with most indices printing an inside day. That means a higher low but a lower high, no trend at all. We continue to see moving averages catching up to the current price, at some point there will be a decision on direction, seasonal trends are bullish while we have a consolidation in the upper part of the previous trend. That would be considered bullish.
The Internals
What’s it mean?
Nothing too exciting yesterday in the internals. VOLD was fairly stable, went down then up while the VIX is still declining but keeping a modest bid. Put/calls rose up some, not too concerning while the TICKS were evenly distributed. Another day of ‘hold the water bowl steady’. Maybe some fireworks next week.
The Dynamite
Economic Data:
- Friday:Durable goods, consumer sentiment
Earnings this week:
- 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.
