The Fuse
Equity futures are down modestly this morning as traders/investors await the August consumer inflation data. The CPI is expected to come in at .6% month/month, the annual rate at 3.8%.
Interest Rates are on the rise this morning as bond continue to be sold. Higher interest rates make borrowing costs steeper and more expensive for coorporations, it also means there is an alternative investment versus stocks that pays a higher and safer return.
Economic data is coming out this morning in the way of the CPI, which is going to be a hot number thanks to the rise in energy prices. Copre prices are on the rise as well, the Fed will be looking at the data carefully. Currently markets are not expecting a hike at the September meeting but the data today and tomorrow (PPI) could turn that on its head.
Not much to report on the earnings front today but we’ll have Cracker Barrel later this am and some smaller industrial firms later in the day.
Nothing too special from Apple today but the stock did sell down. Buyers were not inspired by the new ‘old’ lineup of products coming out this year. Perhaps down the road there will be some interest but for now, stock buyers are nascent.
Breadth once agan was a problem but not so much early on. The Russell 2K was strong for most of the session thanks to a heavy weighting in energy and financials, but even that index fell to the weight of the sellers. Breadth was negative all around, especially on the Nasdaq. There is room for more downside before getting oversold.
More distribution as the SPX 500 had higher volume than yesterday, also a lower high and lower low. That pretty much cements a downtrend, even for a short period of time.
Could we see the SPX 500 make a run to 4,500 by the end of the week? That is a distinct possibility, the money flows have been pretty strong leading into an expiration week. The Nasdaq is doing its part to help guide the markets up, but the IWM is choking. Bulls need to see unison in buying, for at least a couple of sessions.
The Internals
What’s it mean?
Mostly a quiet day after the markets started off lower. It was ‘turnaround Tuesday’ of course, with markets up Monday and destined to be down the following day. The internals were not great either, with ticks mostly in the red while VOLD and ADD headed lower. Put/calls remain an issue while VIX is still dangerously low, any surprises could ignite a slew of sellers to dump stocks.
The Dynamite
Economic Data:
- Wednesday: CPI, crude inventories
- Thursday: PPI, jobless claims, Retail Sales, Business Inventories ECB rate decision
- Friday: Import/Export Prices, Empire Manufacturing, IP and Cap Utilize, Michigan Sentimen t
Earnings this week:
- Wednesday: CBRL, LOV
- Thursday: KFY, ADBE, LEN
- Friday:
Fed Watch:
Several Fed speakers out last week reiterating their hawkish views, though a couple may have hinted the Fed is much closer than everto ending rate hikes. That simply means the economy and monetary policy will be in a new phase of tightening, and that could last awhile longer. No Fed speakers this week as the committee members enter a quiet period. Currently about an 8% chance of a hike at the Sept 19th meeting, but the market is pricing in 2 hikes slightly by the end of 2023.
Issues/Stocks to Watch this Week
Apple – The company’s latest event called Wonderlust starts Tuesday, and it is assumed they will unveil their latest iPhone creation, new watches and perhaps some other new products. Always something to watch.
Inflation – The headline reading for August is expected to be quite high, a 9.5% annualized rate. That is unacceptable, but is mostly driven by higher energy and food prices. Core levels are still elevated though and should remain so. These numbers will be important before next week’s Fed meeting.
ECB – The central bank of Europe will have their rate meeting this week, they have been aggressive with policy in trying to rein in their high inflation. They are likely to raise rates at least once more before the end of 2023.
