September 25, 2024 | Overbought and Approaching Key Resistance

MARKETS

S&P 500: Down -9 points to 5724, VIX: 15.26

Asia: Japan -0.19%, China +1.16%, Hong Kong +0.68%

Europe: Euro Stoxx 50 -0.47%, FTSE -0.28%, DAX -0.43%

FX: USD (DXY) up 0.17%, EUR down 0.17%, GBP down 0.37%, JPY down 0.87%, CNY up 0.01%

Energy: WTI Crude down 0.88% to $70.96, Brent down 0.65% to $74.66

Cross markets: Terminal rate unch at 5.13, Implied rate cuts 2-years from terminal up ~4bp at 233bp, 2/10 yield spread +22bp

Treasuries: 2-year yields up ~1bp at 3.557%, 10-year yields up ~5bp at 3.775%, 30-year yields up ~4bp at 4.126%

WHAT WE'RE THINKING

Snapshot: US equities?are mixed after the S&P 500 (SPX) recorded its 41st all-time high of the year in yesterday’s session. The SPX is little changed this morning, while the equal-weight S&P and Russell 2000 (RTY) underperform. The Nasdaq 100 (NDX) is advancing as the quality factor/secular growth theme leads amid threats of an East/Gulf Coasts dockworkers strike. Tech is the upside standout into the META Connect event (10am PT keynote) and MU earnings (after the close). ‘Clean energy’ Utilities outperform with VST at the top of the SPX leaderboard on reports of emerging deals in the spirit of last week’s MSFT/CEG agreement.??HPE is close behind after a sell-side upgrade cites expectations for faster AI server growth, coincident storage demand and upside from the JNPR acquisition.??Energy, Health Care and Financials are weakest as GPN sits on top of the laggards list for a second day after management characterized FY25 as an operational transition year. Autos are weak with GM and F lower on a sell-side downgrade, while shares of AMGN trade lower after disappointing/underwhelming trial updates in myasthenia gravis and atopic dermatitis. Treasury yields are mostly higher with more curve steepening as the 2/10 spread widens to +22bp. The Dollar Index is a touch firmer with notable strength on the yen cross. Gold and copper are little changed, while WTI crude trades lower despite a larger-than-expected inventory draw.

• A quiet day of US macro data with August new home sales declining less than expected.??
• The macro calendar gets a little busier tomorrow with weekly jobless claims, durable goods orders and final Q2 GDP on the calendar.??August core PCE inflation on Friday is the macro highlight of the week, but the Fed is more focused on growth risks with markets most interested in the September Jobs Report due on Friday 10/4.??
• Bond yields are higher into today’s $70B five-year Treasury note auction. Yesterday, Moody’s warned that the US fiscal trajectory is inconsistent with a AAA credit rating.??
• Fed Governor Kugler speaks later today with a heavy slate of Fed speakers (Collins, Bowman, Williams, Barr, Kashkari and Cook) on tomorrow’s calendar.??
• Overseas headlines have dovish implications with Eurozone wage growth easing according to a new ECB study.??Australia’s CPI cooled considerably, Denmark cut its inflation forecast for this/next year, Sweden cut its main policy rate by 25bp and China issued another incremental rate cut.??
• CTAS, FLUT and PRGS are this morning’s earnings-related outperformers, while KBH trades lower after an EPS miss on weaker Gross Margins and orders a bit lighter than planned. KBH management did note some August improvement amid moderating rates.?MU earnings will be in focus this afternoon with other reports from CNXC, JEF and WS.??

Factor: Equity factor performance since the Fed rate cut has not been aligned with risk-on behavior.??‘Beta’ or relative volatility worked through Monday’s close, while other risk-on factors like ‘residual volatility’ and ‘value’ have lagged.??Risk-off/defensive equity factors like ‘quality’ have outperformed and the most consistent outperforming equity factor since last week’s Fed rate cut has been ‘inflation.’

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Next: The September Jobs Report on Friday 10/4 is the next major scheduled macro catalyst for markets.??The lack of large catalysts before next Friday would normally deliver trend continuation (skewed higher) but a potential East/Gulf coasts dock workers (Longshoreman) strike on 10/1 is a bearish interim catalyst that’s now being priced into markets.??Apparently, the Biden administration is intending not to intervene by invoking the Taft-Hartley Act.??It’s politics as usual in an election year with an estimated daily economic impact of $5B.??History has also shown that it takes ~6 days to clear one day of backlog.?

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China: Yesterday’s announced stimulus package is the largest since 2015 but there is no shortage of skepticism about how powerful the package will ultimately be.??Yesterday’s stimulus measures basically confirmed what had been speculated upon in recent weeks and the policies don’t directly address China’s two biggest issues being massive property inventories and slow household consumption. The announcements were enough to cause a short-squeeze that should last another few days, but more stimulus is likely required to get the country’s growth trajectory above target.??Rebooting China’s economy would be a strong positive for global growth in ’25 but it would also remove a major source of US goods disinflation and complicate Fed activity.

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Chartist: The SPX is now in overbought territory and approaching technical resistance in the 5730-5810 range that we expect to cap the rally – at least in the near-term.??First level support sits near 5340 (-4.3% below current levels) with stronger, intermediate support in the 5070-5190 range (midpoint is -10.3% below current levels).??From a technical perspective, a break below ~5070 would end the bullish cycle.

FACT OF THE DAY

There are multiple Rock Paper Scissors tournaments held in Las Vegas each year with the USA Rock Paper Scissors League Championship (held in April) paying the winner $50,000.??

JSC IN THE MEDIA

Breaking Down FedEx Earnings: Speaking on Bloomberg Television, Andrew shares his take on FedEx’s latest earnings report. Watch Now

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NVDA & AMD AMD to Keep "Fatigued" Chip Trade Moving: Andrew Graham and Kim Forrest appear on Trading 360 to discuss the outlook for semiconductor stocks. Watch on Schwab Network

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Fox Business News: Andrew joins Charles Payne on Making Money to discuss risks to the soft landing scenario and factors necessary to sustain the current bull market. Watch Video

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See more of JSC in the Media.

THIS DAY IN HISTORY

September 25, 1970: ‘The Partridge Family’ makes its TV debut on ABC. The idea for the show was based on the real-life family act The Cowsills (pictured below).??Three members of The Cowsills (Susan, Bob and Paul) are still performing and you can catch their act on November 8 at The Showroom in the Golden Nugget, Las Vegas.??We could make it an Inside Markets readers trip. We can do a separate trip in April for the Rock Paper Scissors championship.?

CATALYST CALENDAR

Tomorrow: 1) Singapore August Industrial Production; 2) Switzerland’s SNB decision; 3) Eurozone M3 money supply data for August; 4) US GDP/PCE revisions for Q2; 5) US durable/capital goods orders for August; 6) US weekly claims; 7) US pending home sales for August; 8) Japan’s Tokyo CPI for September; 9) China’s industrial profits for August and; 10) earnings before the open: ACN, JBL, KMX, and SNX. After the close: COST and MTN.

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Friday: 1) France?CPI for September; 2) Spain CPI for September; 3) Eurozone inflation expectations for August; 4) US personal income/spending for August; 5) US wholesale/retail inventories for August; 6) US PCE for August and; 7) the final US Michigan confidence survey for September.

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Next week: 1) China’s NBS PMIs for September Sunday; 2) Germany’s regional CPIs for September Monday; 3) Remarks from Fed Chair Powell Monday; 4) Eurozone CPI for September Tuesday; 5) US JOLTs report for August Tuesday; 6) US manufacturing ISM for September Tuesday; 7) ADP jobs report for September Wednesday; 8) US services ISM for September Thursday; 9) US jobs report for September Friday.?Earnings highlights: 1) Monday am: CCL; 2) Tuesday am: MKC, PAYX; 3) Tuesday pm: LW, NKE; 4) Wednesday am: CAG; 5) Thursday am: STZ?

Jackson Square Capital produces Inside Markets. We also offer financial planning and investment management services. Learn more here and catch up on our recent media appearances.

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