The Fuse
Equity futures are mixed on this fine ‘Fed Day’, the second of a two-day meeting. This is the sixth session of 2025 and the committee is largely believed to be cutting rates, which could start a rate-cutting cycle into 2026.
Interest Rates are moving lower this morning as bond buyers attempt to get in before the Fed’s decision is announced. No question the bond market is anticipating an ease, the 30 yr yield is down sharply over the last 11 months to 6.39% from about 7% in May of this year. High yield remains strong with tight spreads, Fed futures will no doubt move today following the release of projections.
Stocks are not on the move here this am, a slight gain over in Europe with the STOXX higher by .1%, Germany up by .4% led the way. FTSE added .1%, gold is down close to .7% as is silver down sharply, crude oil is off as well. The US dollar index rose up .1%. Yields on German bunds and US treasuries both declined 1bp, in Asie Japan was down .2% but strong gains in Hong Kong, solidly up 1.7% and Shanghai up .4%.
Earnings from Ferguson yesterday am were very strong with better guidance. This morning we hear from General Mills and get a read on the consumer and inflation with that report, tonight Cracker Barrel and Bullish.
Stocks were on a rollercoaster ride yesterday and mostly pointing downward. There was very little bid in the market but the losses were well contained. With the Fed decision looming and potential positives from a rate cut, who wants to be short or out of the market altogether, just yet. The internals were awful as you’ll see below but that has generally been the theme of late.
Breadth once again is not impressive, we have not had more than two strong days of A/D since mid August. Perhaps moody investors/traders will find some soothing words from the Fed statement this week. Oscillators are not impressed either, about flat or slightly positive. New highs are still crushing new lows.
Weak volume again save for the small cap IWM, which rise up as that index fell. Notch a mild distribution day for the Russell 2K, but the other indices seem to be waiting for news to drop. Also, Friday is expected to be a big volume session with expiration day hitting, that will cover quite a bit of territory.
Moving averages are catching up to the indices now, and that might restrict any pullback to less than 3%, or a garden variety pullback. There is plenty of opportunity to add on the dips but as we know the markets are not always that accommodating. We have support at the 10 day and 20 day moving averages and they are pushing higher.
The Internals
What’s it mean?
More weakness from the internals as the VOLD and ADD just can’t seem to get it together. Also, VIX rose up sharply, no surprise some are buying protection before the Fed meeting ends today with a policy decision. TICKS were very red most of the day reflecting strong sell programs, while put/call ratio again took a nosedive, reflecting buyer interest in SPX contracts and futures. Interesting.
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.
