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S&P 500 pushed still higher, but not before retesting 4,515 on stronger than expected housing data. As if Fed tightening odds (regardless of what Daly said) were to be moved – they were not, and actually rate cut expectations are projected now to start in May instead of Jun 2024 (65% odds). The resulting rise in short-term yields though exerted pressure on Nasdaq, leaving it up to cyclicals (with plenty of support from turning oil stocks) to pull S&P 500 a little higher. The key winner – apart from financials and real estate that I first talked early Nov – is Russell 2000 as financial conditions continue easing.
That also resonates with the early Nov call for soft landing hopes returning – bonds and stocks are rising together while the dollar is trending lower. Both precious metals and oil fulfilled (sideways to recovering) expectations for Friday – the price action in copper also continues being promising for metals as yields are primed for more of a retreat. The only watchout is for Nasdaq not starting to weaken here should yields be treading water for a day or two. Nothing that couldn‘t be managed.
Remember my premium charts last week, and that there are still well over $5T in short-term debt invested (money market funds), in a way sitting on the sidelines. With lower yields, housing springs back to life (see Friday‘s data) and I talked that early Nov already. The WMT vs. TGT disconnect can be really chalked down to guidance.
Let‘s move right into the charts (all courtesy of www.stockcharts.com) – today‘s full scale article contains 6 of them, featuring S&P 500, XLRE, XLF, credit markets, precious metals and oil.
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Stocks and Sectors
Real estate chart shows consolidation, and not a reversal Friday – confirming that the reaction as if rate raising odds went up, has been off mark.
Financials keep confirming the bullish turn – there is no solid upleg without XLF participating. The degree of enthusiasm is promising for future stock market returns.
Gold, Silver and Miners
Precious metals upswing isn‘t yet over, and $2,000 would be broken to the upside. The miners downswing volume also speaks for a daily setback and not a reversal. Friday‘s housing data sent short-term yields higher, yet that would still be dialed back as the soft landing trades get more crowded. Meanwhile, gold in yen keeps doing wonders.
Crude oil
Crude oil accumulation is there, and a new rally is slowly unfolding – while a brief consolidation of Friday‘s turn is likely, $78.50 would be broken with ease to the upside over the nearest 1-2 weeks.
Related: Why Stocks Just Bottomed