Jim’s Notes – Modest Upside but Showing Fatigue

Moving the Market – July 9th

The markets were higher on Tuesday but the move was sluggish looking at the intraday chart it traded in a tight range. The leading sector was once again technology led by the SOXX. Software tested the last two days from the highs. FAANG was flat along with the NASDAQ 100 index. Commodities were mixed with metals lower and agriculture higher. Overall it was a quiet day with average volume. Mr. Powell was the highlight of the day continuing to walk the line of pontificating holding or cutting rates and the timeline. Progress is being made he stated, but inflation still remains. Thus, the belief remains September for rate cuts from the Fed. Wednesday he will continue his testimony on Capital Hill with more of the same. That should provide a good napping opportunity. Bank earnings start on Friday with BK, C, JPM, and WFC releasing data before the market opening. Thursday is CPI data and Friday will be PPI sure to offer some guidance as it relates to inflation and the Fed. The first two days have been a grind so be patient as it all unfolds and manage the risk presented.

The major indexes closed higher on the day with SOXX leading the day. Four of the eleven sectors were higher on the day. The activity throughout the day was in a tight range with no volatility to speak of. Tuesday the NASDAQ closed up 0.1%, DIA was down 0.1%, and the SP500 was up 0.1%. The SOXX was down 0.05%. Small Caps (Russell 2000) were down 0.4%. The ten-year treasury yield was 4.3% up 3 basis points and TLT was down 0.4% for the day. Crude Oil (USO) was down 0.8%. (UGA) was down 0.3%. Natural gas (UNG) was down 0.8%. The dollar was up 0.1%. Plenty to deal with moving forward as we manage our money and emotions relative to the current environment.

Wednesday Outlook: The markets are back to the previous pattern of leadership… technology leading the upside with consumer discretionary pitching in. The markets drifted to new closing highs. The breadth remains challenged. Small caps were slightly lower along with midcaps. A very slow day of action as we let things unfold. Watching how the parts look relative to the whole. What are we watching? 1) The dollar directional shift. 2) Interest rates at 4.3% and still showing volatility relative to the outlook. 3) Crude oil remains above $80… some testing in the last three days. 4) Natural gas remains volatile breaking below the key support levels. 5) IGV was down 1.6% watching how it plays out.

The chart below shows the breadth issue for the SP500 sectors compared from the beginning of the current leg higher that started in April. The technology sector is the only one to outperform the index… Note the rise in XLY last week.

Headlines Worthy of Note:

Chapter 11 filings increased 70% in the first half of 2024. Total bankruptcy filings jumped from 217,000 in the first half of 2023 to more than 251,000 in the first half of 2024 according to Epiq and the American Bankruptcy Institute.

Inflation is rising despite the headlines stating it is cooling. Yes, the rate of inflation has fallen, but we are still seeing price increases month after month adding to the already increased prices. Inflation outrage from customers in shifting the consumer landscape. The consumer has inflation fatigue and it showing up in shopping and dining habits shifting.

Quote of the Day: “People only see what they are prepared to see.” — Ralph Waldo Emerson.

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