The Fuse
Equity futures are slightly lower this morning following a big night of earnings. We heard from three of the Mag 7 names last night and will be treated to two more after today’s close. Following the Fed’s latest cut markets are looking to give back a bit of recent gains, breadth has been awful.
After pouring cold water on the next expected rate cut, Chair Powell has helped push yields back up, as they are where they should be. Markets tend to be aggressive and try to push the Fed to yield to its expectations, Powell wants no part of it. The 2 year bounced higher and is now hovering around 3.6%, the 10 yr also backed up. That meant high yield spreads widened a bit, not surprising. December rate cut odds are now only 69% and not the 96% it was last week.
Stocks in Europe were a bit lower overnight, led down France but Germany was higher. FTSE lost .4%. The dollar index was up one more time, gold breaking below 4K but silver is little changed, as is crude oil. German 10 yr bund yields held steady, in Asia Japan was flat while down moves in Hong Kong and Shanghai after the meeting between Trump/Xi.
Earnings from Google were astounding last night, the stock up 8% on their latest report. Microsoft is backing away and Meta is down sharply, but I expect this to rebound. Chipotle got hit hard as did Starbucks, ServiceNow beat and announced a 5-1 stock split. This am strong earnings from Lilly has that stock up sharply. Tonight we hear from Amazon, Apple, Coinbase, Reddit, Cloudflare and Roku.
That was quite the performance by the markets, and yes the indices finished lower on some ‘sell the news’ and profit-taking, but rising up to these new heights before falling required some incredible agility. The bulls remain emboldened, and though Microsoft and Meta won’t help their cause, perhaps Amazon and Apple will deliver the goods tonight to get the market back on track.
Another day of poor breadth has this indicator now in bearish territory. The talk out there is breadth and how the markets can be rising with two days in a row of porous breadth. Remember, a condition is not a signal, this condition could last but that would not be likely. Oscillators are back in negative territory again, new highs still a wrecking ball against new lows.
More heavy turnover on the indices but this time across the board distribution. That is known as professional selling, we have started to see more of these days showing up, and that should concern the bulls.
It really feels as if the markets are ready to correct or just have a brief pullback. We’re not predicting it nor timing it, but after this very strong run the indices are well above support levels. Now, we could tighten the range and consolidate for a week or more and let the moving averages catch up, but that may not be feasible.
The Internals
What’s it mean?
The internals continue to look bearish and eventually it is going to matter. Ticks were very red and concentrated, so many sell programs hit one after another. VOLD just collapsed midday as did ADD, the VIX, held a bid as well. Just nothing positive here, even the put/call ratio rose up. Bearish.
The Dynamite
Economic Data:
- Thursday:jobless claims, GDP, Bowman speaks
- Friday:PCE, income/spending, employment cost, fed speak
Earnings this week:
- Thursday:LLY, MRK,, CMCSA, OWL, RBLX, BAX, AAP, AMZN, AAPL, COIN, RDDT, MSTR, WDC, RKT, IOT, NET, ROKU
- Friday:CVX, XOM, ABBV, LYB, CHTR, CBOE, NINE, LIN
It’s a huge week for the Fed with some fed speakers later in the week, but the spotlight is on the committee and Chair Powell. The FOMC is expected to cut rates one more time at this week’s meeting, bringing the funds rate down to 3.75%. That is a path the committee talked about at the last meeting with their projections indicating this to be the action. How many more cuts is now the question, Chair Powell may address that in the press conference.
Stocks to Watch
Gold – The yellow metal remains quite volatile and we’ll be looking for gold to make more big moves this week. Gold volatility is extremely high and causing the severe moves up and down, silver as well.
Apple – Always have one eye on the big Apple as they report earnings this coming week. How is the iPhone 17 doing so far, will they run out of product? How about services and other items to drive margins? The anticipation and expectations are high, the stock may fade if there is not enough left into the future for investors.
Google and Meta – We are focusing on these two names here as they are both reporting on Wednesday. Google hit a new high Friday while Meta is still floundering, I expect to see both move sharply following their earnings release.
