Followers of the Morning Minutes may recall that one of the big themes of trading in the spring was market gains becoming concentrated in a small number of (mainly technology) stocks at the expense of other sectors. As we move further into July, the pendulum appears to be swinging back the other way. Yesterday, for example, the Dow Industrials rallied 1.8%, while the Russell 2000 soared 3.5% and the NASDAQ gained only 0.2%.
Today, NASDAQ futures are down 1.5%, S&P futures are down 0.9% and Dow Futures are down 0.2% on no major news. This suggests that the recent market rally may be near exhaustion and due for a pause or correction, possibly triggered by investors deciding to take profits against earnings reports. The VIX has started to climb, a sign of increasing volatility.
European markets continue to struggle with the Dax down 0.5% and the FTSE flat. UK inflation was in line with expectations and steady. US housing starts beat expectations (1.35M vs street 1.31M). US industrial production (street 0.3%) is due at 9:15 am EDT, followed by the Fed’s Beige Book regional economic report at 2:00 pm.
US Crude Oil is bouncing back this morning, up 0.8% after API reported a larger weekly inventory drawdown (-4.4 mmbbls vs previous -1.9 mmbbls). DOE energy inventories are due at 10:30 am EDT today. Gold is up 0.5%, trading near $2,480/oz, while Copper is down 0.5%.
Today’s earnings reports have generally been positive, headlined by beats from Johnson & Johnson and Prologis REIT, both of which are up marginally in premarket trading. United Airlines reports after the close this afternoon.