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“The greatest danger occurs at the moment of victory” ― Napoleon Bonaparte

Morning stock market summary

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

It’s only Tuesday, but futures are little changed ahead of what may feel like a Summer Friday as markets are closed tomorrow in observance of Juneteenth and the northern parts of the country bake in the first heatwave of the summer season.  Between now and the closing bell, investors will still have to contend with Retail Sales at 8:30, Industrial Production and Capacity Utilization at 9:15, and then Business Inventories at 10 AM.  How these reports come in relative to expectations will go a long way in determining whether the Nasdaq can stretch its current winning streak to a lucky seven. The first wave of these reports was just released as Retail Sales came in weaker than expected across the board, and April’s numbers were revised lower.

Overnight in Asia, Japan bounced from yesterday’s 1%+ decline with a gain of 1% while most other major indices in the region rallied by smaller amounts. In Australia, the RBA left rates unchanged at 4.35%, and Chinese Premier Li wrapped up his visit to the country and expressed optimism that the two countries could improve their ties. The tone in Europe is also positive this morning with the STOXX 600 up about 0.5%. CPI for May came in at 0.2% which was in line with expectations and down from April’s reading of 0.6%, but the ZEW Economic Sentiment Index showed a much smaller than expected improvement.

Just when the conversation over the divergence between the S&P 500’s price and breadth reached a fever pitch, the S&P 500 kicked off the week yesterday with a gain of 0.77% and a breadth reading of positive 214, the strongest daily breadth reading of the month! The lack of strong breadth readings would have been understandable in a steadily declining market. This month hasn’t been weak, though; more than half of all trading days have seen record highs!

Even after yesterday’s positive breadth reading, there have still been seven trading days over the last four weeks (20 trading days) where the S&P 500 traded higher on a day when more stocks finished lower than higher.  That’s one of the largest number of negative divergences in four weeks since at least 1990, and the most since August 2020 when there was a record of eight days where the S&P 500 traded higher and breadth was negative.  Back then, the narrative was that the mega-cap tech stocks would benefit the most from the lockdowns and the new world of working from, learning from, eating from, socializing from home, etc.  Four years later (can you believe it’s already been four years?), these same (and some different), mega-caps are now seemingly the only ones with the scale to benefit from AI.

To continue reading the rest of today’s morning note, where you’ll find much more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.

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