The Fuse
Equity futures are lower this morning following continued weakness in treasuries. Bonds have been falling sharply as the yield on the long bond continues to rise.
Interest Rates are spiking again, the 30 year is now above 4.8%, the highest level since 2006. It’s been a meteoric rise of late and no turning back until inflation is tamed. Fed speakers yesterday are clinging to a ‘higher for longer’ narrative.
Not much on the news front overnight but political wrangling between Congress and leadership is straining US confidence. As we start the new month there is some serious danger of the world economy falling sharply into a recession.
McCormick delivered earnings this morning that showed a decline and they raised EPS guidance to in-line.
Fed speakers were out this week and clearly showed a hawkish bias. In fact, fed funds futures now sport a 32% chance of a hike at the next meeting in a month. The jobs data this week is likely to change that probability a bit.
Breadth was atrocious yesterday, nearly 5-1 to the negative. Yet, the Nasdaq 100 didn’t seem to care, the buyers of a handful of stocks were supporting the cause. However, negative breadth has been a problem for weeks and will not help prices rise anytime soon.
Turnover was sharply lower Monday as the buyers lack conviction. It makes sense, until some smoke clears the high conviction buyers are going to wait it out.
Markets probed some lower levels Monday but the lows from Friday/Thursday held firm. Yet, there were only a handful of stocks really driving the market to the upside, reminiscent of earlier in the year when it was the Magnificent Seven leading the way. These stocks have influence, but in a seasonally weaker trend that might not be good enough.
The Internals
What’s it mean?
It may have been a win for the Nasdaq, fourth day in a row but the rest of the market was feeling bears’ wrath. The Russell 2K fell sharply, more than 1% but well off its lows. Notice the concentration of red ticks once again, that is heavy selling into the first day of a new month. That’s not usual. Put/call remains elevated while the VOLD and ADD make new lows, into deep red territory. There is NOTHING bullish about this market now, and with higher rates for longer the clock is ticking.
The Dynamite
Economic Data:
- Tuesday: JOLTS report
- Wednesday: ADP employment, PMI services final, ISM non-manufacturing, factory orders
- Thursday: jobless claims
- Friday:NFP for September, consumer credit, vehicle sales
Earnings this week:
- Tuesday: MKC, CALM
- Wednesday: HELE, RGP
- Thursday: CAG, STZ, LW, LEVI
- Friday:
Fed Watch:
A huge week for fed speakers. No less than thirteen speeches/appearances this week, mostly talking about the same stuff. Even Chair Powell is out later today. We don’t expect much different than an array of opinions, but mostly hawkish.
Issues/Stocks to Watch this Week
Interest Rates – Rates continue to rise as we see inflation just not going away. The Fed is likely now to raise rates in November after Congress avoided a shutdown.
Crude Oil – The strength in crude has been impressive, but the high $100 mark will be strong resistance. However, hanging out above $90 would be very bullish for this market.
SPX 500 – As mentioned above, there is good support at the 4,200 level. We could see a strong test down there but that would break last week’s lows and create a very oversold condition, an a nice bounce opportunity.
