The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Limping in.
The catalysts really kick off tomorrow and investors were in no mood to react in anticipation. The earnings reports from yesterday through today inspired some bullishness but it didn’t stick around. Futures traded up from yesterday evening through the open. Futures topped out around 6 AM ET, +20 points. The index opened around +15 and drifted southward all morning, going negative by 11 AM. Treasuries rallied significantly today, thanks to a very strong 7-year auction. Yields came down 5-10 bips across the curve. This didn’t matter to equities though. There’s a 2% chance for a Fed cut tomorrow in the Fed Funds futures market and the cuts for the year are priced at 46.
With so much event risk around the corner, perhaps it shouldn’t surprise us to see a small amount of risk-off action today. Stocks were sold, bonds were bought, capital flow was a bit higher at 112%. The run in the S&P, no matter what time horizon you choose, is pretty wonderful for the longs. The speculative run has ended and the market is on the cusp of new fundamental developments. Today, the longs ran out of muscle and the sellers chalked up a small win. I don’t think there’s more to it than that.
Starting with ADP (+75k est vs -33k prior) at 8:15 AM tomorrow morning, we are going to watch and react.
The Fed announces at 2 PM and the press conference starts at 2:30 PM. It’s almost universally assumed that the target rate will remain. Most Fed-watchers are expecting to get signals that a cut is likely in September. Questions about Presidential pressure on the Chairman will make the press conference much different than usual and I wonder how markets will react if things get tense or testy. Powell will try to remain above the fray but who knows if he will or can.
Once we deal with the Fed news, the market will close and then we’ll react to the earnings and guidance from Microsoft and Meta. Don’t assume the initial after-hours reactions will hold overnight.
The countdown is approaching T-minus zero.
See you tomorrow.
-Mike
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