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Stocks are moving a bit lower this morning following some weakness overseas. No question the stock market is overbought and did rally hard off the lows Monday but six sessions up in a row is begging for a pullback. Today or tomorrow? No matter, just be prepared.

Interest Rates are creeping higher but on the long end a bit below Monday’s highs. Yields have proved troublesome for stocks when they are rising, and look no further than the effect on small caps. Fed futures still see two cuts in 2025 and that may not change at the next meeting in June, high yield remains very tight.

Equity futures are down a bit this morning but we could certainly turn the tables again like Monday. STOXX in Europe were up slightly, mixed in France and Germany. The dollar index fell .1%. Gold is higher by .5% along with silver, crude oil off modestly. German 10 yr bund yields were down 3bps, 10 yr US treasury yields also down 2bps. Stocks were up in Asia, Japan higher by .1%, Hang Seng 1.5% and Shanghai up .4%

Earnings from Home Depot this morning were very strong but they did miss guidance and will keep prices steady despite tariffs, unlike what Walmart stated last week. Tonight we’ll hear from Palo Alto, Toll Brothers and Keysight.

After a potentially deadly shot by Moody’s to recent rally, stocks started off more than 1% but crawled up from the floor like a boxer who was hit with a 1-2 punch. Give credit to the bulls, who scored another win as it appeared the debt downgrade Friday night would send shivers down the bulls’ spine. Not to be right now, the market is full of dip buyers at the moment.

Poor breadth all session long but the bulls managed to close the gap a bit. There was only a modest differential at the closing bell, oscillators did lose some ground but the rally back was impressive. New highs are still climbing but not yet on a buy signal. We could have seen that much-needed pullback this morning, perhaps we’ll have a run to higher ground later in the week.

With the heavy selling off the open following the ‘surprising’ downgrade of treasury debt we expected to see quite a bit of turnover early, that happened. But throughout the session the volume did turn bullish, which tells us the algos in control Friday night simply offered the dip buyers an opportunity to add more. Typical on a bullish environment.

The SPX 500 continues to knock on the door of 6K. It’s been an amazing run since the huge drop to 4,800 and while it appears the market may be getting tired there is no let up. Volume is good, price action is strong, broad rallies across many sectors and solid action in tech names which are leading the way Even poor UNH was up yesterday.
 

The Internals

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What’s it mean?

A mixed session for the internals. The ADD was actually leading the way, making a move to the zero line after getting trounced early in the day. The VIX made its high of the day early and retreated, it may head to the low teens this week in front of the holiday. Put/calls sank even lower than before, this indicator on a buy signal. Ticks were about even but I’ll say they were biased to the bullish side. VOLD disappointing, maybe that changes today.
 

The Dynamite

Economic Data:

• Tuesday:Fed speakers
• Wednesday:Miki Bowman/Tom Barkin
• Thursday:Jobless claims, pmi, home sales, NY Fed Williams
• Friday:New home sales, fed speak

Earnings this week:

• Tuesday:HD, ILI VIK, AX, PONY, PANW, TOL, KEYS, SKY, VSAT
• Wednesday:TGT, BIDU, TJX, VFC, WIX, KNOP, XPEV, ZM, SNOW, DOMO, URBN
• Thursday:ADI, BJ, AAP, RL, TD, DECK, ADSK, INTU, ROST, WDAY, CPORT, STEP
• Friday:

Fed Watch:

It’s going to be a busy week of fed speakers, in fact everyday someone will be out with speeches or Q/A. We might here some comments about the recent debt downgrade and that won’t be positive. Yet, with better inflation readings this past week there is some indication the committee may start talking about rate cuts and when those might happen.

Stocks to Watch

Nasdaq – As this tech index leads the way, markets have been looking for some leadership and finally got it.
The Mag 7 names have come alive again and while they are not at all time highs yet, that could be coming soon.

Interest Rates – A late downgrade by Moody’s of US debt may cause some heavy selling in bonds this week.
That may just be an initial response as bond buyers still picked up fixed income when other firms had downgraded the debt prior.

Tariffs and Trade – The news of a potential deal between US/China sparked a nice rally on Wall Street but it was more relief than anything. We don’t expect too much more until the negotiations get underway.

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