The Fuse
US equity futures are ripping higher this morning following the Fed meeting a cut in the Fed funds rate. Yesterday’s press conference by Chair Powell was as expected but the ‘dot plot’ seemed to be much more dovish than once though. Two more cuts expected this year but only one in 2026. Small caps are on a roll this am and may close at an all-time high.
Interest Rates are dropping a bit this am as the fixed income market is rallying following a rather dovish fed conclusion. Bonds are catching a nice bid, we may see further gains into the end of the month. High yield remains strong as spreads are tight, indicating a strong economic backdrop. Fed futures looking for two more cuts this year. The 2 year yield popped up yesterday near 3.6%, not alarming but something to watch for.
Equity futures are on the move and going up following in Europe’s footsteps. The STOXX rose .5% led by large increases in France and Germany. The FTSE added only .1%, the dollar index up also .1%. Gold is backing a way as is silver slightly, crude oil barely changed. Stocks in Asia were mixed with Japan up nicely, 1.1% gain but Hong Kong and Shanghai succumbed to profit taking. Yields were up in Germany but down for US 10 yr treasuries.
Earnings last night from Cracker Barrel were a disappointment, the stock being punished early today. Later in the evening we’ll hear from FedExand Lennar, this morning from Darden and Factset.
The Fed came and did their thing this week, cutting rates by 25bps and hinting there might be additional rate cuts to come. But their approach is slower than most would prefer, choosing to let the data tell them how to craft policy. That is how it always has been (or should be), nonetheless the committee’s projections see a cut at each of the next two meetings but only one so far for 2026.
Good breadth all day long thanks to the Russell 2K strength but then the bulls faded the market following the Fed announcement. Breadth went from about 3-1 positive down to flat, that has to be considered a disappointment for the bulls. Yet, oscillators remain steady as NYSE is about flat while Nasdaq is slightly positive. New highs continue to beat new lows, this indicator remains bullish.
As volatility expanded so did volume. Stronger turnover yesterday especially during the market selling off by nearly 1% and then battling back is what traders like to see. Dip buyers had their way and tip-toed back into the market. We may see some upside today if overseas markets rally up in kind. Look for heavy turnover on Friday’s big expiration.
A nice dip midday as markets appeared ready to fall down hard but the dip buyers appeared. They aggressively bought that dip and now after testing some good short term support we might see some recent records get taken down. Small cap IWM really looks strong here and ready to pop to $250 or so.
The Internals
What’s it mean?
Lousy internals after the Fed meeting as a nice early rally was sold off aggressively. Ticks were heavy green early in the session but flipped to red, VIX fell hard early, rallied and then fell again to cluse near recent lows. Put/calls are low and the ADD and VOLD were poor, we expect that to improve.
The Dynamite
Economic Data:
- Thursday:Jobless claims, Philly Fed, leading economic indicators
- Friday:Mary Daly speaks
Earnings this week:
- 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.
