Equity futures are straddling the flat line this morning trying to figure out a direction.
Monday saw the S&P 500 reach above 4,300 for the first time since a massive breakdown occurred in August 2022. What makes this tag of 4,300 different than the other is the market momentum is swinging upward, the index is above all relevant moving averages and money flow is very positive.
Still, with last week's very strong advance at the start of June, we may soon have an overbought condition. At that point, markets may correct and pull back to make the bulls from this recent rally very uncomfortable. But it might also establish a nice dip-buying opportunity.
Apple
Monday kicked off Apple's ( AAPL) big developers conference and amid all the excitement the company introduced its first new line product since 2014 -- the Vision Pro augmented reality (AR) goggles.
The price of this headset is a whopping $3,499 per pair, but that is often the approach for Action Alerts PLUS holding Apple: introduce at a high price then slowly reduce it. For some the announcement came with the promise these glasses would be available in 2024, so Apple is missing the Christmas buying season. Other upgrades and enhancements to other products were announced as well.
Interest Rates, Economy
Rates are lower this morning as traders continue to position themselves for the wide open Federal Reserve policy meeting next week. How they will decide is truly a coin flip situation.
Fed Funds Futures are seeing a 20% chance of a rate hike next week, but an even stronger chance of a July hike (54%). Hence, the market is speculating a pause/skip next week and then a rate hike in July is "in play."
Of course, we have plenty of data to come before that decision, including the May CPI reading on Tuesday (the first day of the Fed meeting). Currently nowcasting by the Cleveland Fed has May consumer inflation coming in at just under 2.5% annualized, the lowest reading in months. In addition, the nowcasting is predicting June inflation to come in at an annualized rate of 3.5%. Core CPI remains very hot if the Cleveland Fed is correct.
Consumer Spending
Last week we mentioned some comments from Bank of America ( BAC) CEO Brian Moynihan that he believed consumer spending was slowing down. He can certainly make the argument based on credit card data, but this morning an earnings miss by restaurant name Cracker Barrel ( CBRL) offers further evidence. The restaurant chain said casual dining traffic declined at the end of the quarter. This is a theme that we need to watch carefully, as it could spill over to other retail franchises.