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“There are some people that if they don’t know, you can’t tell em” – Louis Armstrong
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Futures are in rally mode again this morning as the S&P 500 is poised to gap up 0.35%, which would take the index to record highs. The Nasdaq is further from its highs, but futures on that index are much stronger, pointing to a 1.15% gain at the open. Besides strong earnings from Palantir (PLTR) after the close yesterday, equities are higher. Treasury Secretary Bessent said that a deal to reopen the Strait of Hormuz could be announced as early as today or tomorrow, and while we’ve all heard that before, markets are encouraged by the news.
Outside of equities, crude oil prices are down nearly 4% while the 10-year Treasury yield is down 2 bps to 4.66%. Gold prices are up a little over 1% while Bitcoin is basically unchanged.
In Asia, it was a muted session as the Nikkei and Shanghai Composite both rallied 0.3% while the Kospi jumped 1.6%. European stocks are also riding the rising tide with the STOXX 600 up 0.6%, led higher by a 1.1% gain in Italy, where Retail Sales unexpectedly fell 0.1% versus forecasts for a 0.3% increase.
In the US today, the only reports on the calendar are Factory Orders and JOLTS at 10 AM, but there will be a steady stream of earnings after the close.
They say stock market rallies come when you least expect them. Last Wednesday afternoon, after Kevin Warsh’s press conference and the market declined more than 1%, you could argue that the last thing investors were planning for was a three-day streak of 1%+ daily gains for the Nasdaq. Instead, so many were pulling their hair out about threats to “Fed independence.” Never mind that the new Chair voted with more than two-thirds of his peers to keep rates unchanged, or exactly what the market was expecting heading into the meeting.
Right on cue, though, the market came out and did what it always does by surprising as many of its participants as possible. And while the rally was unexpected, the timing wasn’t random. As shown in the chart of the Nasdaq below, last week’s bounce occurred right as the index tested the low end of its downtrend channel that’s been in place since the June highs. Today is where the rubber meets the road, as yesterday’s close took the Nasdaq right up to the top end of that channel and right below the 50-day moving average. If this morning’s pre-market gains can hold, both the 50-DMA and the downtrend will be broken to the upside, but there’s still a full session of trading left. Your move Nasdaq.
As mentioned above, the Nasdaq has rallied at least 1% for three straight trading days, which from a historical perspective is nothing special. It’s the second such streak this year, and since the Nasdaq’s inception in 1971, there have been 68 other streaks of 1%+ daily gains lasting at least three trading days.
The chart below shows where each prior streak of 1%+ gains occurred throughout history, and the same conclusion holds as they’ve occurred at every stage of the market cycle, which makes them useless as a signal. We don’t want to get ahead of ourselves, but Nasdaq futures are currently trading about 0.9% higher in the pre-market, so an extension of the current streak to four trading days isn’t out of the question. Since 1971, there have only been 17 other streaks where the Nasdaq rallied 1%+ for four straight days, only five when it rallied 1%+ for five straight days, and the only streak of 1%+ daily gains lasting more than five days ended on 12/31/91 at six straight days.
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