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Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Investors may have been puzzled by the lack of any material weakness to kick off the week yesterday, but news overnight of a ceasefire between Iran and Israel was likely what the market was sniffing all along. Following yesterday’s intraday rebound, equity futures are indicated to open sharply higher, even as they have given up some of their prior gains. The key to watch today will be how the market trades throughout the trading session. Can it build on the early gains, or will investors look to take profits?
Besides the Mideast crosscurrents, investors will also have to contend with some economic reports, including the 10 AM releases of the Richmond Fed Manufacturing report (expected to weaken modestly) and Consumer Confidence, which is expected to build on last month’s much better than expected report. Besides the data, several FOMC members are scheduled to speak, with the most notable being Chair Powell when he testifies at 10 AM to the House Financial Services Committee. We’ve already seen three members of the FOMC strike a more dovish tone than Powell (Bowman, Goolsbee, and Waller), so will he dig in his heels or strike a more dovish tone? There’s only so long that tariff-induced inflation can be a ‘tomorrow’ story.
After rallying as much as 1.3% intraday yesterday on the back of a rally in crude oil, the S&P 500 Energy sector sold off over 4% on an intraday basis in what turned into a wild intraday range, even in a sector known for its volatility. The result was what technicians call an outside day, where the intraday high exceeds the intraday high of the prior session while the intraday low is below the prior day’s intraday low. Not only was yesterday an outside day for the Energy sector relative to the prior session, but it was also an outside day relative to the sector’s range over the prior five trading days! This morning futures are continuing the weakness from Monday as WTI trades down over 3.5% to just under $66 per barrel.
Days when the Energy sector’s intraday range exceeds the trading range of the sector’s prior five trading days have been very uncommon. While there was another similar “Mega” Outside Day for the sector back in March, since 1990, there have only been six other such days. There was one in April 2024, but before that, you have to go back to October 2018 to find the next occurrence. The chart below shows each of those prior “Mega” Outside Days. Outside of the first two in May 2003 and March 2005, all of the other occurrences have taken place during the 10+ year period where the sector has essentially been rangebound as the sector is at the same levels now as it was in 2008.
