The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Waiting?
US equities started the day lower. Futures implied 40 points of downside in the premarket and the S&P 500 ended up opening down 20. This was likely due to higher crude prices and higher yields, a continuation of recent moves in both those markets. The S&P recovered the early drop and gently wandered around flat for the rest of the day. News was inconsequential and capital flow was very light, 75%
Why did nothing happen?
That’s an impossible question but we might as well speculate. News matters of course and today’s headlines didn’t change much. Given the lack of engagement by investors, as measured by the capital flow, it is reasonable for us to simply explain stocks going nowhere fast due to the light volume.
Additionally, we have speculated that investors have been saving their strength for the pending megacap tech results. Tesla and Alphabet announce after the close, so today was the last chance for investors to rest and prepare. We’ll just have to see if TSLA and GOOG can inspire the summers masses into action.
Perhaps this is a good bead on the nature of the US stock market currently… but the tricky part is the crude market and the bond market. They both continue to trend in the wrong direction for stocks. They continue to weight on equity markets, although equities are being quite resilient, even in this light-volume environment. Setting aside the Tesla and Alphabet earnings catalysts, we are heading for a reconciliation.
Either crude and yields drop, so stocks can climb or stocks are going to have to drop, to reflect the prices in the oil and Treasury markets.
Stocks have historically hung in there during brief periods of yield increases, provided the Fed wasn’t driving the hikes *and* the bond market was itself speculating about the future, which ended up being incorrect.
Is that the current situation? The Fed should let us know their role next week. We need to see more inflation data for the second piece of the puzzle.
See you tomorrow.
-Mike
Visdom Market Commentary
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