Futures vs FV: SP +16.24; DJ +167.17; NASD +47.54
Futures up on a steady rise from the open. No gap higher, just a steady positive move to highs the past hour. That kind of burn higher is the best kind of indication, and it happens to be upside. Recall, the bias hung in even as the market suffered some weakness. The indices were at the lick log as noted in the report, and they look to at least start with a bounce. Holding on is the key and you have to watch and see if the sellers that showed Friday return on a solid upside open.
The data remains in a negative bias and there are repercussions.
Housing Starts, Feb: -8.7% vs -1.6% expected vs +11.7% prior (from 18.6%)
Permits: -1.6% mo/mo
Single family homes take it on the chin, -17% mo/mo, -10% year/year
Fed Funds Futures Contract: Now shows >50% probability of a rate CUT in the September to January FOMC meetings.
Upgrades: NVDA, BBBY; DOW; BBT
Downgrades: crickets . . .
Yield Curve Inversion: CNBC headline claims bond market is saying a recession is coming and therefore a rate cut is coming. There IS an inversion that indicates recession? Hmmm. Hmmmm.
Brexit: Some of the supporters apparently realize it is 'deal or no deal' as May warned and are now jumping on board supporting her deal with the EU.
Case/Shiller Homes Index: Up 3.6% when expected to rise 4.0%.
BONDS: 2.441% vs 2.414% 10 year.
2 year: 2.285%
EUR/USD: 1.1286, flat
USD/JPY: 110.49, +0.54
Oil: 59.83, +1.01
Gold: 1314.90, -7.70
Not a lot of cheery news this morning yet stocks moved up all morning and are trading near the morning highs the past hour. It would appear investors are coming to grip with the yield curve inversion that is not even an inversion in the historical sense in terms of coming recessions. The NY Fed is trying to get refine the indicator to make it even more leading, but its theory is not tested for all recessions. Even if it was, the market tops well after an inversion of the historical levels, e.g. 2 year/10 year. So, even if the NY Fed is correct, the other indicators have to show their signal and then the traditional clock starts from there.
Thus, stocks are up in the face of the inversion. The indices needed to hold, the key stocks needed to bounce in order to keep the market holding the current gains and trying to push higher. They are going to do that, at least for the morning.
As noted, staying power is the key. Sellers stepped in and pushed SP500, NASDAQ back last week and we will see if they appear again. Stocks such as NVDA are set up well and received a catalyst today. We will be looking at those coming off good tests.
Jon Johnson, Chief Market Strategist
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