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The Fuse

Equity futures are getting off to a slow start this morning. This is the last trading week of August and while many traders have left their desks early before the holiday expect some volatility with news and big earnings releases having an influence.

Interest Rates are higher this am across the curve. High yield is backing off the gains from Friday, fed futures have now aggressively priced in rate cuts again, about 3 by year end. The 2 yr yield also down sharply since Friday.

Stocks in Europe were mostly open but the UK was closed. France and Germany were down, the US dollar rose .1%, yields in Germany and US 10 YR also rose 3bps and 1bp respectively. Gold is down modestly, silver down almost 1%, crude oil up almost .8%. In Asia Japan stocks up slightly, Hong Kong jumped 2%, Shanghai up 1.3%.

Huge week for earnings with NVIDIA the highlight. We’ll also hear from Snowflake, Okta, Veeva Systems along with HPQ, Crowdstrike and some small Chinese companies and retail. Tech will be in focus though.

What a rally after Chair Powell’s dovish speech at Jackson Hole. It was quite extraordinary but not all that unexpected. The Chairman stated it may be time to shift monetary policy but he was a bit more guarded in his words, stating downside risks exist for employment but upside risks are there for inflation. The stock market liked this pivot though and there was a thunderous roar by the bulls.

Breadth was outstanding on Friday. Despite some weaker numbers earlier in the week, the Friday differential was tremendous. It was a rare 10-1 rout of the bears and much of that skew hit pre-market and during the first couple of hours. The intensity of the buying had the sense of short covering and heavy buy programs, that certainly was the case. Can there be some followthrough?

Strong turnover in the industrials and small caps catapulted those indices higher. It was a sharp jolt right after the open as buyers just came after stocks in a big way. That opens the door to more upside, but with the high numbers Friday don’t expect that sort of similar action today, but followthrough is key to keep this going.

Maybe the brief move down to the 50 and 20 moving averages was enough of a test to arouse the bulls’ attention. It was very impressive how the expansion of breadth and volume pushed the markets higher in classic fashion. Without being overbought at this point there is a chance to see more upside if there are any buyers left before the end of the month.

The Internals

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What’s it mean?

Just wow! Amazing turnaround for the indices with just a few words from Chair Powell that did the trick. That VOLD exploded higher after coiling for the last few sessions, everyone was bullish including a massive drop in the VIX, strong TICKS all day and even the ADD finished strong. Followthrough is key.

The Dynamite

Economic Data:

• Monday:New home sales, fedspeak
• Tuesday:Durable goods, home prices, consumer confidence
• Wednesday:n/a
• Thursday:Jobless claims, GDP revision, Waller speaks, pending home sales
• Friday:PCE (July), income/spending, inventories, consumer sentiment

Earnings this week:

• Monday: PDD, NSSC, SMTC, HEI.
• Tuesday: BMO, EH, DQ, OKTA, MDB, BOX, NCNO, PVH, JOYY, OOMA.
• Wednesday: KSS, SJM, ANF, WSM, RY, MCFT, PLAB, DCI, NVDA, SNOW, CRWD, HPQ, VEEV, NTNX, URBN, FIVE, PSTG, NTAP TIGR.
• Thursday: DG, BBY, TD, CM, BBWI, BURL, DKS, OLLI, LI, MRVL, DELL, IREN, ULTA, S, AFRM, GAP, AMBA, ESTC, WOOF.
• Friday: BABA, DOO.

Fed Watch:

It wasn’t a Fed meeting but it sure felt like one was happening going into it. Chair Powell flipped on everyone and is now seen as a bit more dovish but also slightly hawkish. The Chairman believes monetary policy conditions are too tight and that may warrant a cut at the next meeting or two.

Stocks to Watch

NVIDIA – The big chip maker reports earnings this week and will be the focal point of market players. Since last earnings the stock is up about 40%, a very strong move but they seem to deliver each time – we’ll see how it goes.

Google – This stock finally hit a new all time high on Friday and really has some momentum in its sails. Can it continue? Good news has been coming for the company of late.

Breadth – We noted the strong breadth figures for Friday with the small caps leading. Oscillators are up as we expect but if today is also strong there might be more upside before the end of the month.

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