SPX & NDX Hit Record Highs as Crude Oil Slides to Key Support

Sam (0:00)

So that's how we're looking as we kickstart this fresh trading day, and of course, a half an hour into the session here, we have had a bit of data out this morning as well, but let's just get to KG now for a market thought and the levels you're watching right now on the S&P, this record setting day here. Just talk us through what you're seeing on the screens right now, KG.

Kevin Green (0:21)

Well, Sam, we are seeing breath expanding today, and we are seeing the S&P 500, as well as some of the other indexes hitting all time highs here. This is actually a really strong day to the session. In fact, if you're looking at the S&P 500 equal weight, it's up about 0.7 percent, pretty much matching what the market cap weighted index is doing. This is not really just a concentration within technology stocks or even communication services. You already highlighted the semis. In some respects, the memory names are actually pulling back here a little bit. You're seeing some really good strength when it comes to utilities, which we'll talk about a story around that later, as well as industrials. Industrials up about 1.1 percent, Caterpillar looking very strong today. So this is kind of that market breath expansion that we've been kind of speaking about over the last couple of trading sessions. And it seems like we are seeing some follow through, at least for now. Now, volatility itself is sitting in around 15.5. So we're expecting less than 1 percent move. But to the upside, I'm looking at 78.35 as a major area of resistance. There has been a call spread that actually has been put on here, a significant amount of contracts between 78.5 and 78.60. So somebody is taking a shot that we can move a little bit higher above my level.

That I've been kind of highlighting here, but we'll see what actually happens. To the downside, you want to be able to hold 78.00, we break below that 77.80. But this is actually looking like a very strong start to the day, and hopefully, it's able to last where yields are, where they're at right now, which is pretty much flat on the session.

Sam (1:44)

Yeah. As you mentioned, I mean, breath-looking supportive to your point. I mean, it's a much more sort of broad-based rally than we've been talking about with a handful of stocks that are carrying this. And I know that you and I were speaking about that yesterday, how the metrics had looked good. And you'd have pointed out as well that we typically see these kind of follow through days with setups like we saw yesterday. So let's see how long it holds. But I did mention the international trade data that came through this morning with that trade deficit. I mean, winding 105.6 billion dollars. I was looking at the export numbers for August 1.4 percent, but the imports caught my eye. 4.3 percent, the capital goods, 146 billion dollars. I guess that speaks to the amount of chips that the country is having to bring in right now to fuel the AI infrastructure build out. But it's also higher oil prices. So this seems to be a value story and a volume story. KG, just walk us through what this all means.

Kevin Green (2:37)

Yeah, it does appear that maybe some of the backlog that we've seen in some of the PMI data, especially on the manufacturing side, is starting to kind of come through here to the United States.

The administration was looking for deficits to kind of close, and we're actually seeing it widen out. Now, that actually can be a tailwind for a lot of these companies, as you talked about, the AI names, as well as industrials. Energy is going to have an impact on that a little bit, but that should be more of an export story rather than an import story, just given the fact that we are kind of backfilling some of the supply within the globe because of the disruptions within the Strait of Fort Lewis, as well as the Babatman Dab. The data this morning had a second tier, third tier type of data. Nothing too big on the radar. We did have some economic optimism data that came in a little bit better than the street's expectations, but the trade balance and deficit I thought was very interesting. I think that's where you are seeing maybe this split between where yields are right now, where we are still seeing them relatively elevated, even though volatility in the yield space is coming in a little bit lower, but you are still seeing maybe some of these high yield credit names, like an oracle for that matter. There are credit default swaps. They have been moving higher over the last couple of days, but actually we are starting to see that kind of top out and we are starting to see high yield credit spread starting to move back to the inside here, or actually narrowing, if you will. That also is conducive for equities moving higher. So the economic data, once again, not a huge deal with that trade balance I thought was actually very surprising just given the narrative that we have heard from the administration and the direction they would like to see that to go.