The Fuse
Equity futures are showing a modest rally this morning as the Fed meeting gets underway later on today. The market believes the committee will decide to cut rates for the first time in 2025 at the conclusion of the two-day session, but is unsure of the policy statement language of press conference from Chair Powell.
Interest Rates are slightly lower this morning as bond traders continue to trim and add around current yields. No question the fed decision will have some impact on fixed income this week, so it’s time to be prepared. High yield remains very strong, the 2 year yield remains steady. Fed futures seeing a slight chance only of a 50bp cut tomorrow.
Stocks are up this morning but weakness in Europe is evident. STOXX fell .2% with bigger decreases in France and Germany. The FTSE also lost .2%. Gold is higher and well above 3,700 per ounce, silver has a nice bid while crude oil is up about .5%. The US dollar index fell .3%. Japan climbed .3%, small gains in Hong Kong while Shanghai was flat. US 10 yr treasury yields fell 1bp.
The earnings calendar is thin this week, with the biggest name being FedEx. We’ll also get a read on the consumer with Darden, Cracker Barrel and Dave/Buster’s. Housing will get a look with Lennar and Ferguson.
Solid followthrough day for the indices as the SPX 500, NASDAQ and Industrials all rallied to another new all-time high. For the SPX 500 it was another milestone, closing above 6,600 for the first time ever. Nasdaq 100 is closing in on 25K, an amazing achievement when just under 25 years ago the index was hovering near 1K. No question names like Google and NVIDIA and Microsoft have boosted the index and helped bring other stocks up with it.
Good breadth, slightly positive is the best we can say about yesterday. There is some churning going on under the hood, we won’t know if it is meaningful for at least few more days. Oscillators are still on the positive side and new highs are robust, this indicator remains in the bullish camp.
Turnover is starting to rise and we’ll have much more buying/selling by the end of the week. The Fed meeting starts today and will no doubt create some trading opportunities, while Friday’s big option expiration day will bring a torrent of volume.
The higher we go, the harder we are going to land when it comes to testing support. The indices are further away now from their short term moving averages and that means an overbought condition is present. That is not a signal of course, but we should respond if the market starts to move south decisively. As it is, the 20 day moving average is more than 3-5% away, ripe for a correction.
The Internals
What’s it mean?
Another lethargic day for the internals but still on the bullish side of things. The VOLD just cannot seem to get going, the ADD started up and fell all session long. Meanwhile, put/calls plunged heavily as call buyers were very active, TICKS were mostly green all session, so quite a few buy programs. All in all, a decent showing but not demonstrative. Maybe that will be after the fireworks this week.
The Dynamite
Economic Data:
- Wednesday:Housing starts, building permits, FOMC rate cut decision/Chair Powell press conference
- Thursday:Jobless claims, Philly Fed, leading economic indicators
- Friday:Mary Daly speaks
Earnings this week:
- Tuesday:FERG
- Wednesday:GIS, MANU, CBRL, BLSH, SANG
- Thursday:DRI, FDS, FDX, LEN, RSSS, SCHL
- Friday:
Fed Watch:
Fed meeting this week and the market is largely looking for a rate cut. That will likely happen, we’ll see projections for the next few months and into 2026 to see where they see growth and inflation coming in the year ahead.
Stocks to Watch
Options – Friday is a big expiration day, we’ll see heavy volume and some volatility.
Bitcoin – The crypto currency looks to have bottomed and is on the rise, this may lift other markets.
Bonds – Keep an eye on fixed income, if the fed follows through with a rate cut the bond market may give some information over what may be next.
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