Market Alert - Pre-Market

Futures vs FV: SP +4.85; DJ +6.17; NASDAQ +12.15

Stocks reportedly ready to bounce today but the futures are well off morning highs. NASDAQ futures were 25+ but are tailing rapidly. The half-life of the recovery appears just about over. A drop would have been better at the open for the kind of catharsis Cramer and some others talked about last night.

Speaking of catharsis and thus sentiment, MS joins the call of market selling, saying the market is in for its biggest correction since February and that the average investor will get hurt. Also, Doug Kass reiterates his warning, stating that market tops are a process and it appears to be making an important one.

As you can see, sentiment is still mixed, but frankly, worry is not high enough to start a serious, sustainable rebound. Even the futures know it.


Personal spending: 0.4% vs 0.5 expected vs 0.5 prior (from 0.2%). Nice revision.

Personal Income: 0.0 vs 0.4 exp vs 0.4 prior

Real spending: 0.3%

PCE: 0.1%, 2.2% year/year

Core PCE: 0.1; 1.9% year/year

Q2 Employment Cost Index: 0.6 vs 0.7 vs 0.8


Earnings beats: PFE; ADM; KLAC; BP

Misses: PG (TL); WCH (TL); TXRH (TL, BL); ATHN (TL); AKS (BL)

Not all of the top line misses. Throw in the big names, NFLX, FB, AMZN. Top line misses are more of an economic indicator. During the prior administration there were earnings beats galore -- on the bottom line. Companies received all kinds of breaks over small companies and even though sales fell, they beat on the bottom line as the cut costs (read employees) dramatically. That ended the past year, but now it is returning. To us that is a true indicator of economic activity, and combined with the action in RUTX and the volatility in other growth indices, it is not an economic positive.


OTHER MARKETS
Bonds: 2.954% vs 2.75%

EUR/USD: 1.1723 vs 1.1705

USD/JPY: 111.60 vs 111.04

Oil: 69.69, -0.44

Gold: 1218.10, -3.20


Futures are holding gains but off the highs. This is a 'show me' type bounce, i.e. it has to show staying power, and in this pre-market it has been pressed to hang onto its early relief bounce gains.

Chicago PMI still to come at 9:45ET. FOMC starts its next rate hike meeting today. The Fed remains a real problem because it wants to continue hiking even as the economic indications are weakening (yield curve, top line misses rising, growth index volatility). That is the real risk moving ahead.
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Jon Johnson, Chief Market Strategist
InvestmentHouse.com

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