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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.  

There’s a monster list of economic data on the calendar this morning, and most of it will be hitting the tape at 8:30, so good luck trying to keep track of it. In a nutshell, initial jobless claims were basically in line with forecasts while continuing claims were modestly higher than expected. Inflation data was a bit higher than expected, and Durable Goods were better than expected. Ahead of the data, futures were modestly lower following overnight weakness in Asia and Europe.  Crude oil is higher and above $81 per barrel, while the 10-year yield is unchanged at 4.33%.  One of the biggest drivers of the weakness this morning comes from Micron (MU) which is down 6% in the premarket after reporting better-than-expected earnings but merely reaffirming guidance.  The weakness in MU has overflowed into the entire semiconductor space, including Nvidia (NVDA) which is down 2%.

Outside of India, major Asian equity indices traded lower overnight as Hong Kong led the losses with the Hang Seng down over 2%.  China’s Shanghai Composite finished down 0.9%, and the Nikkei was down 0.8%.  In China, Industrial profits were down 3.4% YTD and improved from April’s YTD reading of 4.3% while Retail Sales in Japan rose more than expected (3.0% y/y vs 2.0% estimate). Following the lead of Asia, European stocks are also lower this morning, but not by as much as their peers in Asia. The STOXX 600 is down 0.3% with the biggest losses in France (-0.7%) and Spain (-0.7%) while Germany is slightly higher.

With the S&P 500’s price and net daily breadth moving in opposite directions for five trading days in a row now, the daily divergences have started to add up and the gap between the S&P 500 and its cumulative A/D line has widened.  While price and breadth tracked each other very closely for the eleven-month ending about a month ago, the last month has seen each move in opposite directions.

With the first half ending tomorrow, we wanted to see how the recent daily breadth divergences this year compared to the first half of prior years.  Through yesterday’s close, the S&P 500’s price and daily breadth readings moved in opposite directions on 23% of all trading days.  Dating back to 1990, that level is tied for the most ever.  The only other year where there were as many daily breadth divergences was in 1995, and the only other year that was even close was 2000.  While 1995 and 2000 may have been similar in terms of breath divergences, from a market perspective, that’s about where the similarities end.

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