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stocks ripped higher today with the S&P 500 hitting a new all-time high we did have a bunch of economic data that came out this morning and I will share it with you but I think one of the biggest stories of all is your first major Central Bank globally has now started to reduce rates yes the Bank of Canada cut rates this morning and that paves the way for the US and Europe to start cutting rates as well and there is something specific that is going on right now in regards to that that is really helping our bond market and that is positive for stocks overall it looks like Tom Lee's call yesterday of a 4% rally for the S&P throughout the month of June doesn't look so crazy after all the S&P is up over 1% today alone first up according to Goldman Sachs a flood of cash from passive Equity allocations will pour into the stock market in early July setting up a continued rally through the early summer Goldman Sachs says the start of Q3 is when a wall of money comes into the equity Market quickly since 1928 the first 15 days of July have been the best two-e trading period of the year for equities and they tend to fade after July 17th the S&P 500 has been positive for 9 straight July posting an average return of 3.7% the NASDAQ 100 index has an even better record posting gains in 16 straight July with an average return of 4.6% that's compelling evidence to argue maybe we will get a really strong summer rally the biggest headwind to markets right now is this perceiv narrative that there could be a recession coming and that's really what has hurt stocks over the past couple of days you have seen 10-year treasury yields basically collapsed from 4.62% down to 4.29% yes there are reasons why bonds are trading lower today but the past couple of days equities have actually been falling on Aggregate and that was based on recession fears well not today actually quite the opposite first up you had the ADP employment change which added 152,000 jobs in the month of May the expectation was around 175,000 jobs so not as good as what we were expecting but still an overall strong number The Sur service providing sector added 149,000 jobs mostly trade transportation and utilities up 26,000 education and health care services up 46,000 Financial activities up 28,000 and Leisure and Hospitality added 12,000 jobs now that's pretty unusual because Leisure and Hospitality tends to be up there towards the top as far as sectors adding the most jobs this does mean that maybe your Friday's jobs report could could come in a little bit on the lighter side at least that's what wall Street's saying this data was important today but it's really not the reason why stocks are rallying if anything this actually adds to some of the recent fears about a Slowdown and/ or recession what actually got markets excited today was the ISM Services PMI now you really have to break down these numbers because the headline came in at 53.8 the estimate was 51 so you came in hotter for services in the month of May ISM Services business activity skyrocketed to 61.2 the estimate was 52.3 so that came in much higher than the estimates and even higher for last month last month only came in at 50.9 so that was a big big beat which really pushes back on the whole economy slowing narrative you have ISM services employment which came came in slightly on the weaker side 47 .1 the estimate was 48 that kind of lines up to some of the other data that we have been seeing you have ISM Services New orders that came in at 54.1 the estimate was 53 so that was a little bit better than expected but you have the ism Services prices that came in at 58.1 the estimate was 60 so that came in a little bit light so what does this mean just wrapping it all together services are doing just fine the business activity in the service sector just fine but prices came down last month that is your by definition soft landing and this is the data that is really quelling some of those recession fears we've had over the past week or so so that was very positive for markets today but you also had the Bank of Canada interest rate decision now I took the liberty to listen to the press conference from the Bank of Canada and it sounds a lot like what Jerome Powell says they're going to be cautious they're going to see what the data looks like they're going to take things meeting by meeting but they did kind of put an emphasis on rates are too high there it's too restrictive to bring inflation down this last you know step of the way that it needs to go now Canada's pce or CPI is at about 2.7% a little bit lower than ours and their econom is not as strong as ours so we're in a little bit different of a camp but still that's kind of highlighting where we are right now as well we're expecting inflation is going to come in very light over the next 2 months maybe there is too much restriction on the economy after all if you take a look at a stock like Five Below I mean they've plummeted about 34% in the last quarter heading into their earnings if you look at a company like Lululemon they also report earnings today and after hours they have plummeted about 30% as well if you basically look at any retail company in the last couple of months they have not done well and that's because there are fears that the consumer is really starting to slow down different areas if you look at real estate we had some pretty bad real estate housing starts that just came out a couple of days ago different sectors of the economy are just not doing great after all I've been saying this for months here on the channel fed Jerome Powell is basically begging for a reason to start cutting rates and he is well I want to say slowly but surely but pretty quickly here in the last couple of weeks getting a reason to actually cut rates now also what the Bank of Canada cutting rates today does is it means that the US now pays a higher rate than Canada because Canada was at 5% and we are higher than that at about 5.25% Canada dropped their rates by by one cut to 4.75% that means the spread is now wider between US and Canada that means if you are a Canadian business or person or whoever you are that wants to you know put your money into bonds now it looks even more attractive to buy us bonds instead of Canadian bonds so that is also likely fueling some buying pressure in the bond market in which you probably know this but when there's buying pressure in bonds that sends bond prices up and that sends yields lower and 10-year treasury yields today are falling another 4 and 1 half basis points you are also expecting to have the ECB the European Central Bank lower interest rates by a quarter of 1 % coming tomorrow as well so it's really going to make our bond markets look very attractive for Global Investors you have the Bank of Canada that's starting to cut rates you're going to have the ECB that is starting to cut rates China Chinese rates are at like 2% or or something super low uh Japan's at basically nothing right and even if there's so many different rates for China I believe their internal lending rate is 2% but their actual banking rate is around 5% but the world really doesn't want to own Chinese bonds anyways you can kind of exclude them in that it really just means the US bond market now is becoming a lot more attractive and that could help drive down our bonds even though the FED over here really hasn't done anything there is currently a 19.3% chance of the first fed cut coming July 31st now if 10e treasury yields continue to fall that is likely going to boost these odds even more and I do think coming by CPI next week coming by more economic data throughout the next you know almost two months between now and July 31st you're likely going to have enough confidence to start cutting rates by July 31st in fact July 31st is uh I would argue going to be that first cut by the FED unless the economy just continues to show a lot of strength again in and it really hasn't been recently and by the time it's it looks like you should be cutting rates you're already too late and I don't think the FED wants to make that mistake being too late to cut rates when they were already too late to start raising rates and remember as long as the FED is cutting rates because the economy is okay but inflation is falling that's great if the FED is cutting rates because the economy is getting worse or something is breaking that's when things or that cut I should say is not going to be seen as a good thing Ryan Dietrich over here on X says a 4% or greater monthly gain is is fairly rare but also quite bullish the S&P 500 higher a year later 81.3% of the time and up 12.2% on average but it just happened in May which is actually the most bullish month of them all a higher a year later 10 for 10 and up 20.1% on average which again Tom Lee's call is for for a 4% rally in the month of June so if that happens it does mean the end of the year is probably going to continue to be strong as well Bank of America's sevida submaranian I probably just butchered the crap out of that says sside indicators at levels suggesting the SPX has a potential to advance 133% over the coming 12 months with a 94% positivity rate it seems like right now you can really just choose what you want to look at if you're a bull and you want to look at data that suggests markets are going substantially higher over the next say 12 months I think you can do that if you want to be a bar and look at data that would suggest we're going into a recession I think you can do that as well and I do believe that will lead to a lot of volatility in the next coming months until we get a more definitive picture of what's actually going on with the economy what the fed's going to be doing and how Corporate ear earnings are going to look but today the markets are deciding it's a good day the data was good Bank of Canada's cutting rates ecb's expected to cut rates tomorrow what could go wrong tomorrow you really don't have much of anything you have exports and imports and the balance of trade that will move around the estimates for GDP the current estimate per the Atlanta fed GDP now tracker is sitting under 2% and that's something um that some people have been pointing out recently to say that's not great well we kind of already know that right these GDP numbers have kind of been fugazi for a while now but the Atlanta fed GDP now tracker is now at about 1.8% estimated GDP for Q2 and the balance of trade exports and imports will move that number as well coming tomorrow but tomorrow morning you will also get Challenger job Cuts expecting about 64,000 not usually a big deal but in this market environment we will see initial jobless claims also comes out at about 8:30 in the morning expecting a tick higher from last week's number of 219,000 up to 220,000 but unless we get a big down move or big up move there it's probably not going to do much of anything and that's pretty much it for tomorrow you do have a 4-we and an 8-week Bond auction some pmis um coming out of Canada and then your ECB press conference at 8:45 and the morning tomorrow the big data and really what could upset the markets is your non-farm payrolls again You're Expecting about 185,000 jobs the number is probably going to come in closer to about 150,000 maybe even lower than that most banks are saying right now like Goldman Sachs and Bank of America anything above like 120 130 is probably okay or probably decent uh decent enough for markets to go higher anything under especially 120,00 ,000 100,000 is where the markets are going to get a little bit more worried and definitely push up those odds of cuts coming sooner by the FED but then at that point you're already in the situation of is the Fed cutting because we're going into recession or is the Fed cutting because they feel they can which if we continue to get more bad data then the markets are not going to like that and stocks are going to sell off I've also said that for a while now bad bad news bad data is bad news for stocks whether or not markets take it as bad news or not or when they start taking it as bad news I never had the answer to that but it seems like now is when bad news is starting to be seen as bad news JP Morgan came out with a uh funny note today they say quote I want to know where where all the hot economy above Trend growth reaccelerating inflation High wage growth ticking higher higher is a given rates are not restrictive enough fed will not cut rates in 2024 fed will actually hike this year people are hiding while the economy is simply normalizing on all fronts a quick look at the technicals especially on the Russell 2000 you did break under that 50-day moving average at one point today you're back above that next major level is around 20559 when you get above your 20day moving average and then you're going to be higher than all of your um major or important moving averages once you're above about 205 58 now um then you can start to make some sizable gains to the upside and our previous you know multi-year high was around 212 on small caps and honestly I think we could rally a lot higher than that maybe to about 220 even 230 if the jobs report comes in around 160 170 180,000 along the lines of estimates I think markets would really like that as long as wage growth is not too high and you're not seeing other Troublesome signs and also again 10year treasury yields have fallen over 30 basis points in just the last couple of days and stocks have only been green today that was it you haven't seen any love in the markets from 10year treasury yields actually falling which is normally what would happen in the last couple of years if treasuries were to take a move lower especially a huge move lower like we've seen over the past couple of days that usually was good for stocks it hasn't done anything for markets and days so maybe there is that catchup effect where you could see quite an aggressive rally in just a short amount of time because we've kind of ignored this and S&P 500 is hitting new all-time highs today I think again you just want to watch that 50-day moving average around 5117 which is I mean you're at 534 today so you're quite a bit off of that and then you do want to watch your 20day moving average as well which is going to be sitting right at about 2 or uh two who that would not be good 52665 which is basically where you were yesterday so you're adding a pretty nice gain today we'll see if we give that back or if we Trend sideways or maybe even continue to break out from here I I think it's hard to judge on the technicals there's not really a lot to look at here I mean 535 545 those are levels of resistance potentially to be watching for um but on the downside really it's only that 20-day moving average and then that 50 day and then the 100 day we're really in Uncharted territories as we are at all-time highs section we do have earnings today and after hours from Lululemon Five Below and Victoria Secret these are all now heavily discounted retailers the fear has really crept into these stocks and we'll see if people are really slowing down I think these three earnings could be a little bit more important right now considering the jittery you know feelings that investors have about a potential recession that could be coming so let me know what you think about all of
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