Jim’s Notes – Weekend Update & Outlook

Moving the Market – June 29th

The markets started higher, and moved higher, but failed to hold the move, and closed in negative territory. The NASDAQ and SP500 struggled after the first hour of trading giving up solid gains as investors seemed determined to sell stocks. What leadership there was was mixed as the transports were the leading sector. It was the end of the quarter as well which brought some rebalancing from pension funds and others. The mega caps were weaker on the selling but they held support on the test lower. Earnings from NKE put a damper on consumer stocks after leading the last two days. NKE fell 20% on the news. Five of the eleven sectors were higher on the day showing a mixed result. QQQ moved back below the 10-day MA. The dollar was flat, interest rates ticked higher at 4.34%, gold was flat, and crude oil was lower. Banks posted a solid gain up 2.6%. XLY and XLU led the downside. The broad indexes look tired as the upside move lost its mojo on Friday. Watching money flow for clues where investors are willing to put money to work. Small caps (IWM) saw some upside in the small-cap oil, semiconductor, and software moving higher. On the economic front, the PCE data was in line with expectations but also showed inflation is sticking around for now. The reaction from investors to the data started as positive but the gains were used for some selling/profit-taking. Personal income and spending were higher for the month of May. Consumer sentiment ticked up as well for June. There is plenty to digest as we look forward. June is over, the quarter is over, and the first half of the year is over… that means more data and earnings are on the horizon.

The major indexes closed lower on the day with sectors showing mixed trading. The volume was above average with VIX dipping lower. The activity started lower and the afternoon bounce pushed the index to positive territory. Thursday the NASDAQ closed down 0.7%, DIA was down 0.1%, and the SP500 was down 0.4%. The SOXX was up 1%. Small Caps (Russell 2000) were up 0.4%. The ten-year treasury yield was 4.34% up 6 bps and TLT was down 1.8% for the day. Crude Oil (USO) was down 0.4%. (UGA) was down 0.7%. Natural gas (UNG) was down 3%. The dollar was flat. Plenty to deal with moving forward as we manage our money and emotions relative to the current environment.

Monday Outlook: The markets start the second half of the year with plenty of economic data on tap. The markets remain news-driven. The breadth is still narrow as we continue to look for broader leadership. The last week showed small caps and software adding some upside momentum and we will watch to see if that continues. Watching how the parts look relative to the whole. Commodities continued to struggle as they look for direction and catalysts. What are we watching? 1) The dollar moving higher. 2) Interest rates at 4.34% and still showing volatility. 3) Crude oil remains above $80… 4) Natural gas remains volatile as it moved down 8% last week. 5) DBA moving lower as commodities overall look for direction. 6) Mega caps tested… is there more to come? 7) Small caps bounce is it real this time… not yet. Taking what is offered and balancing the risk.

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 telecom last week.

Headlines Worthy of Note:

Student loan payments go on pause for millions of borrowers. The Biden administration is at it again defying the Supreme Court rejection that the White House has the authority to dismiss loans. We will see how it works out this time around.

Walgreens (WBA) plans to close stores and exit primary care. In addition, they failed to hit earnings expectations. Their shares fell 23% in the last two days…

Cocoa prices fell from the June highs of $10,800 to $7,200 in the last few weeks. The weather reports from Africa are improving helping the outlook for higher yields. The short term prices still are volatile in the commodity.

Quote of the Day: “If you steal from one author it’s plagiarism; if you steal from many it’s research.” — Wilson Mizner.

Hot Topics

Jim's Notes latest update directly to your inbox!

Please enable JavaScript in your browser to complete this form.
Scroll to Top