The Fuse
Equity futures are mostly mixed with the Nasdaq sporting a small gain along with the IWM, other indices are slightly lower. Traders and investors are ready for the deluge of big earnings that will be coming out today and all week long.
Interest Rates are on the move again, rising up as bond sellers continue to distribute fixed income. The 30 yr has topped 4.5% once again while the 2 yr yield, a marker for inflation has quietly risen to the 100 day moving average at 4.16%. Fed futures backing away from uber aggressiveness but still are not yet in alignment with Fed ‘stated’ policy of a gradual move, that might happen after next week’s meeting.
European stocks gained a small bit of ground overnight, the dollar was flat while crude oil rebounded from a difficult Monday session. Gold is moving a bit higher, the german 10 yr bund yield rose by 4bps, the 10 yr treasury yield up 2bps (weakness seeing in small caps). Stocks in Asia were mixed, Japan gained nearly 1%, Hong Kong up .5% while Shanghai down a sharp 1.1%.
A big earnings morning with MCD, PYPL and SOFI, earlier strong earnings and forecast from Pfizer and Crox, but the the latter is down modestly. Tenet beat but guided in line, JetBlue posted a loss while BP was mixed but announced a big share buyback. Later today we’ll hear from Chipotle, Alphabet, Visa, AMD, Snap, Reddit and First Solar.
A good day for the bulls all around, though the Nasdaq fell back into negative territory at days end. That’s fine though, with big earnings in tech coming later in the week I don’t believe see too many ‘flat’ sessions this week. Further, we now have only three sessions remaining in the month of October, and with an unknown result from the election looming large there could be wild swings.
Breadth was positive for the first time in a week. That was actually from a deep oversold condition, so no surprise there was at least some life in the bulls yesterday. As always, followthrough is key, can the bulls rummage enough energy to push the markets back u with good breadth? Oscillators moved higher, the Nasdaq is almost positive now, the NYSE has a ways to go.
Good volume in the Industrials gave that index an badly needed accumulation day, the Russell 2K was strong but did not have higher volume than Friday. That’s fine, a followthrough day here on higher volume would inspire the bulls to get moving. Turnover should improve over the coming days as more volume is churned following the big earnings reports.
Last week’s support levels held firmly, the Industrials were in need of some relief and got it on Monday. The small caps were also higher, striking as yields were up, we know the relationship is negatively correlated there, but Monday was a an outlier. Given the situation with earnings this week, the SPX 500 and Nasdaq could zoom higher or tank hard, volatility remains elevated. Perhaps next week is when there will be some resolution.
The Internals
What’s it mean?
Monday’s internals were actually okay to start with, but faltered late as some sell programs kicked in the last hour.
Yet, the VOLD finished at its highs of the session, a strong move but the ADD and ADSPD declined from the opening bell. That is not inspiring, the VIX was lower but off the lows of the day, ticks were distributed rather evenly but with a bias towards the bearish side. Anything goes this week.
The Dynamite
Economic Data:
- Tuesday:Consumer Confidence, JOLTS
- Wednesday:ADP, GDP first look, trade balance, retail/wholesale inventories, pending home sales
- Thursday:personal income/spending, PCE, jobless, claims, employment cost index, Chicago PMI
- Friday:October labor report, S&P FINAL PMI manufacturing, ISM, construction spending, auto sales
Earnings this week:
- Tuesday:SOFI, PYPL, BP, MCD, PFE, RCL, JBLU, CROX, THC, AMD, GOOGL, SNAP, CMG, V, FSLR, RDT, QRVO, CB
- Wednesday:LLY, CAT, HUM, BIIB, EAT, ADP, SAN, MSFT, META, COIN, HOOD, ETSY, ROKU, SBUX, CVNA
- Thursday:UBER, PTON, MRK, COP, SIRI, MO, MA, EL, NWHL, AAPL, AMZN, INTC, TEAM, ARDX
- Friday:XOM, CVX, FUBO, W, CHTR, LYB, BFLY
Fed Watch:
No Fed speakers scheduled for the week but they said plenty in early October! Several members stated in no uncertain terms they are not going to move aggressively on rate cuts. The market still does not believe it, but so there is a disconnect. The Fed always wins when it comes to policy, but the futures market is going out on a wire, expecting two cuts. They are likely to be disappointed.
Stocks to Watch
Mag 7 – It’s a big week for these high voltage names. We had a big move up in one name last week in Tesla, and five others will report this week including Apple. No doubt these stocks will beat handily, but we’ll have to listen closely to guidance. Most have been beaten up the last couple weeks, a good response would lead markets higher.
Labor Report – The all-important labor report comes out Friday and that will be a gamechanger. We had strong growth in jobs during September, will there be followup? All signs point to a goldilocks scenario, but a strong job number will push the Fed back in their rate cut adjustments.
Yields – Rates have risen sharply across the curve since the big rate cut in September. What might get bond buyers interested again? Perhaps a cooling off in the labor market and a milder than expected GDP for Q3 (out Wednesday).
