Market Alert - Pre-Market

Futures vs FV: SP -15.18, DJ -138.41; NASDAQ -55.87

The test of the bounce off support and break through first resistance is on. Stock futures traded modestly lower early morning, even bouncing off the modest lows. As of 7:00ET, however, futures started to slid, falling to early morning lows. Held, looked as if they were going to rebound in the range, but at 8:30ET they morning support broke. Futures tumbled. Trying to rebound a bit pre-open, but not expecting any kind of new bids to send the market higher this morning.

At 8:30ET retail sales hit along with Empire manufacturing. Not bad numbers. Before that, HD issued its earnings and missed on the TL thanks to the very cold winter. With HD missing and the stronger economic data, the 10 year yield jumped over 3%. Algos had the combination to sell and the sell programs triggered. Thus, the test is on.

HD: Missed top line, missed on comparable sales but fully affirmed the year and said May was a 'resumption' of the consumer cycle. Not helping HD this morning as the algos are in control for the moment.


Chips: STM raises its guidance. Not all bad.


Oil: Hitting a 3.5 year high at 71.60, even as the dollar rises. The word is all the excess supply if finally getting sopped up.


Retail Sales, April: 0.3% vs 0.3% exp vs 0.8% (from 0.6%)

Ex-Auto: 0.3 vs 0.4 prior (from 0.2)

Control Group: 0.4 vs 0.4 vs 0.5 prior (from 0.4)

You have to like the revisions. That shows unexpected strength. On the other hand, fuel cost increases played a significant role in the monthly number. Remember, it is not units purchased, but dollars spent. Thus if inflation is causing the rise in dollars spent it is not a great number and indeed bad because inflation controlling retail sales moves higher is actually detrimental.


Empire PMI, May: 20.1 vs 15.0 vs 15.8 prior


China: Kudlow says 'bromance' between Xi/Trump and predicts a deal. At the same time the US ambassador says China wanted specifics from the US, it got them, but is balking. Says they are 'far apart.' Optimist versus a realist (or is that pessimist?)


Ebola: Congo preparing for 'worst case.' Well, it should. That is an appropriate reaction for any outbreak of this stuff.


OTHER MARKETS
Bonds: 3.043% vs 2.997%

EUR/USD: 1.1845 vs 1.1935. Dollar has resumed its run

USD/JPY: 110.19 vs 109.63. Resumes here as well

Oil: 71.60, 0.68

Gold: 1299.20, -19.00


Futures bounced off morning lows hit just before 9:00ET, but they have rolled over again. Thus, at the open there will very likely be no upside bid reversal to drive stocks higher. Again, the test is on and it is a matter of where the leaders and the indices hold support. HD is not helping the DJ30.

A couple of areas to watch: chips (showed some life Monday, STM upped guidance) and cloud software that was down Monday (e.g. NOW, DATA, ULTI).

Will see how we can ride out the continuation of the test that really started in some areas Friday, more Monday, but today all.

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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