Consumer Staples was the only sector able to eke out a gain yesterday, although the S&P 500 was on the cusp of reversing higher late into the session. Mega-cap weakness sent Communication Services (XLC) lower.

Market Breadth

Overall, volume was anemic, and decliners were just about double advancers. In general, market breadth was sluggish.

But there was one silver lining as the new highs on the New York Stock Exchange (NYSE) got back to early March levels.

Fed Fund Watch

I have to say I’m surprised the needle didn’t move more on the rate cut probability other than commencing in September instead of November.

Despite the ten-year yield edging lower, it survived a freefall from earnings in March. I think a move lower in the yield is the key signal that the Fed is ready to pause. I must reiterate the Fed is playing a dangerous game and should come out today to announce a pause.

Portfolio Approach

There are no sector weighting changes this morning in our Hotline Model Portfolio.

Today’s Session

It’s all quiet on the western front on this option expiration day. Yields are moving lower this morning, with the 2-year down to 4.12% and the 10-year yield trading at 3.53%. 

We will get another glimpse into how the economy is doing at 945am ET with the preliminary release of the IHS Markit Manufacturing as well as Services PMI for April.