The Fuse
US equity futures are flattish before some heavy economic data is released this morning. After an attempt to turn the markets around following Tuesday’s ugly session the stock market is in a holding pattern, waiting on the August job report to be released Friday morning.
Interest Rates are running slightly higher as bond sellers are taking control. Yesterday we saw the inversion between 2’s and 10’s disappear for the first time in awhile, but it has been pressure on the 2 year yield that made it happen, which is going to put pressure on the Fed to keep a dovish monetary policy working for some time when they finally do start cutting rates. Fed futures expanded and see more cuts coming in 2024 than is being talked about.
The market is waiting on some data today and tomorrow, as we saw Europe flat during their session, the dollar also flat. Japan fell 1% while Hang Seng had a slight loss, Shanghai with a modest gain. Gold is rallying to near new highs, crude oil is trying to get back above $70 per barrel. It seems flat is the new ‘up’, but volatility will tell the story soon.
Earnings last night from C3AI were in line, not good enough for the stock to rally. Copart and Casey’s General Store missed as well. This morning Lands End had a nice beat, G3 performed in line but guided down while EV maker NIO rose on revenue and a narrower loss.
Markets continue to be rattled after that devastating loss Tuesday. It was one of the worst starts to a month in some time, but as we know the knee jerk response could be quite powerful and quick. With a jobs report looming, whatever the result we could see a major decline in volatility just because the news is out.
That is a common theme with markets since late 2022.
Breadth moved back into the plus column yesterday but barely. Early on some good buying hit but then the sellers got active and closed the markets mixed by the end of the session. Oscillators remain negative though, but not oversold as of yet. We continue to slosh around in a no mans land with poor liquidity, which means the action is quite erratic. New highs are still trumping new lows, that is on a bullish signal.
Volume was a bit lower than Tuesday which means the SPX and Nasdaq were spared from a distribution day. However, we expect money flows to ramp up by the end of the week, with the labor report and buying that often happens to start the month. If the ADP report comes out positively then we may see a nice bid in the market by Friday.
More probing of support, the SPX 500 hit the 50 ma on the lows just as it did on Tuesday. That level (5,500) seems to be pretty firm, but then the more times that level is pushed on the weaker it becomes. Certainly the Industrials are in a good spot with this recent pullback, but Tuesday’s low needs to hold firm. If so, this index will move to new highs. The Nasdaq needs some help from the tech group, that will require some heavy lifting during a seasonally weak market period.
The Internals
What’s it mean?
Not much to write home about. The pretty dull session had a bearish tint all session long, the pressure still there after Tuesday’s pasting. Put/calls elevated, the VOLD and ADD barely were above the zero line all day long, while the VIX cruised higher again. If the VIX does fall below 20 that might be a bullish signal. Ticks were mostly red again, a poor sign for today’s trading.
The Dynamite
Earnings this week:
- Thursday:NIO, FCEL, SAIC, LE, GIII, KFY, AVGO, PATH DOCU, PL, BRZE, ZUMZ,TLYS
- Friday:BIG, ABM, BRC, GCO
Economic data this week:
- Thursday:ADP, jobless claims, productivity, PMI final services, ISM services
- Friday:NFP for August, hourly wages, unemployment rate
Fed Watch:
A little Fed speak this past week but nothing too notable, Atlanta Fed Chief Bostic trying to play shy about rate cuts. This coming week we’ll hear from NY Fed President Williams and Fed Governor Waller. We don’t expect much to change but those two speak AFTER the jobs report is released, so it may have some impact.
Stocks to Watch
NVIDIA – After reporting strong earnings last week the stock sold off sharply and is settling into a range. That will frustrate most traders but give it some time, the stock is likely to break out past $132 when nobody is looking.
Labor – With the markets closed Monday for the Labor Day holiday it seems appropriate the jobs report come henceforth. Last month’s reading was less than expected but economists are looking for something stronger this time around. Eyes on the unemployment rate and wages.
Banks – This group has been strong of late, especially JPM and GS. Keep an eye out here on this group as a strong breakout might bring higher prices. For sure, low rates have been seen as benefiting the banks (mortgages, refis).
