The Fuse
Futures are modestly higher as equity traders try and take the indices up for a second straight session. The Dow Industrials were up Monday for its largest gain since June. Today being the last day of the month we continue to see some ‘window dressing’ of portfolios but realize the real action comes over the next three sessions.
Interest Rates are down this morning as bond traders are back in buying fixed income overnight. We have seen the 10 year hit the 5% mark as of late and that often sparks more selling in both equity and bond markets. If rates are stabilizing and start moving down, that will be helpful to the stock market.
Market sentiment is quite low now as many investors/traders see that as a sign for the markets to turn higher. Seasonal trends are in its favor. GM and the UAW agreed in principle to a new contract that will end the weeks long strike by the autoworkers.
Strong earnings from Caterpillar this am but a guide lower was not something expected. Very solid numbers from Eaton and Amgen as well, Pfizer is down after a wider loss. Later today we’ll hear from AMD, First Solar, Caesars, Match Group and Paycom among others. Tomorrow al is Humana, Wayfair, CVS, Estee Lauder and Kraft Heinz.
Plenty of events this week including Apple earnings, some other big earnings reports, a Fed meeting, a new month and a jobs report to worry about. Whew!
Not a bad day for the bulls as Big Monday played out positively. Certainly a 1 percent or more rally might have seen a much stronger breadth reading than 2-1 but the bulls will take what they can get. The markets are still in a corrective phase so this could be unwound very easily within a day or two, and with news coming out from the Fed and employment, there is great potential.
Turnover was much strong on the DIA yesterday than the other indices, that was clearly where the action was located. Higher volume on the Nasdaq too, more than normal as the bulls had their way of things. Yet, it may have simply been window dressing for month end – Without a followthrough day here it may all be for naught.
That 4,100 level held in like a champ on Friday as we suspected, so now there is some distance between that level and current prices. However, unless there is a breakout of sorts then the downside remains vulnerable. We are in a bullish seasonal period (this week) that could give it back very quickly and violently.
The Internals
What’s it mean?
It was nice to see the bulls finally have things turn positive for the first time in awhile. The internals were solid all session long, with the VOLD screaming higher and finally finishing at a strong level. ADSPD was also strong and finished near the highs of the session, VIX traveled down all day long while the ticks were very much in the green all day. Can we get a repeat on Tuesday, or will this be a turnaround Tuesday?
The Dynamite
Economic Data:
- Tuesday: Employment Cost Index, Chicago PMI, Consumer Confidence
- Wednesday: ADP, ISM, JOLTS, Fed decision, construction spending
- Thursday: Jobless claims, productivity/unit labor costs, factory orders
- Friday: NFP employment report, Global final PMI, ISM, non-manufacturing index
Earnings this week:
- Tuesday: AGCO, CAT, ETN JBLU, PFE, SFM, AMD, CZR, FSLR, YUMC
- Wednesday: APO, EAT, CVS, DIN, DD, EL KHC, MLM, YUM, DASH, ABNB CF, CAKE, EA, MDLZ, IR,QRVO, PYPL, QCOM, ROKU, Z
- Thursday: COP, CROX, CMI, CYBR, LLY, RACE, K, MAR, TAP, PZZA, PH, SHOP,SBUX, WEN, AAPL, SQ, CRUS, NET, FTNT, MSI, SWKS, OLED, WW
- Friday: AMC, AXL, CAH, DOC
Fed Watch:
The second to last Fed meeting of the year is upon us and there is a strong likelihood the committee will pass on hikes this time around. However, we want to listen to the committee carefully to see if they are intent at continuing rate hikes. The data this past week showed inflation was still a problem and still rising higher. Tuesday/Wednesday is the Fed meeting.
Issues/Stocks to Watch
Apple – The biggest company in the world will release earnings on Thursday, everyone will be watching/waiting with great anticipation. The stock chart is horrible at this point after a severe 20% correction. Will good earnings change that and turn the chart bullish again?
Federal Reserve – It’s time for another interest rate policy decision, the committee is likely to pass on a hike this week but will continue to keep the door open for more hikes. Last week’s inflation numbers were not Fed friendly. I expect to hear the Chairman and the committee reiterate their commitment to snuff out inflation and do whatever it takes. As Powell once said, ‘there is going to be pain’.
Interest Rates – Will the news releases this coming week help to bring bond buyers back or will the 10 year finally get a week over the 5% level and stay there for awhile?