Recent data has confirmed Fed Chair Powell's dovishness, says Fundstrat's Mark Newton

Dow’s on its longest winning streak since December and is now approaching 40,000. Let’s take a closer look now at the charts. Joining us is Mark Newton Fundstrat, global head of Technical Strategy. What do you get a couple of of jobs reports I guess claims number that goes up and our cuts is that what’s causing is that’s what I know it’s technical you’re not really a fundamental guy but the attitude kind of changed the back back again didn’t it to a possible cutting scenario. I think that’s right Joe. Look I think the narrative has changed to some extent. We do see the bad news is good news for the stock market anything that causes rates to start to pull back a little bit and or the US dollar is seen as very good for risk assets. And so we did see jobless claims hit the highest level since last August. We saw a really poor ISM number and also a lower jobs number last time and the combination of those caused treasuries to finally start to rally. I think that’s honestly a very good sign at a time when people were worried that rates were going up above 5% on the 10 year that inflation was here to stay. So you know the real key I think from an economic standpoint will be CPI to really see if there’s some evidence that that can start to pull back. You know, technically the market’s in very good shape here Brett is you know largely we see about, you know over 70% of the stocks above their twenty day moving averages. That’s a very good sign and it hasn’t been technology. That’s what’s been interesting. We’ve seen other sectors start to participate and you see financials, industrials, materials, even utilities, which is largely an AI driven theme as to why that sector is moving. But you know it’s gotten to be a lot more broad based. And so that gives me some comfort that this actually can continue and we are sort of in a sweet spot at the time when you know the economy is chugging along and there are few signs that it might be starting to to to pull back and tear off a little bit. But I don’t think it’s that dramatic. Is there any reason to think that that growth or or a slowdown in in labor in what we see on the 1st Friday of every month, will that definitely translate into to cooler inflation numbers? It’s not, doesn’t mean it has to be that way, doesn’t it? Yeah, look, I I think it’s always very difficult to take economic data and and try to you know pinpoint exactly what the market’s going to do. I I would say the labor market is, is you know we’re seeing evidence of of the starting of some cooling. We certainly don’t see rapid unemployment and I think the market knows that and that’s certainly a good thing. But the recent data has confirmed I think Powell’s dovishness and I think the market still is on pretty good footing. I mean technically we’re in, you know, as I said, very good shape. You just have to look at the sector rotation and what’s happening. And technology, you know, even though it’s pulled back a little bit has not really. You know, we’re not seeing a massive decline in most tech. It’s stabilized and stocks like Apple have begun to start to break out and that’s a very important piece for the S&P and for QQQ. So how’s the sentiment bullishness, bearishness and and as far as election years, we’re up I think what 9% at this point so far what what does that indicate for the for the remainder of the year going into November, You know historically when we’ve seen five straight months of gains and obviously April was down that usually is very, very good. Heading in for the balance of the year. The average gain is about 16% starting and you know April into the end of the year and April was down 4%. So that usually is very good. But you know, we still have two wars. There’s a lot of contentiousness. A lot of, you know, the climate is very poor right now in terms of being an election year. People are very unhappy. And, you know, in general that type of negativity is very, very good for the market. So sentiment has contracted. We saw those three weeks of decline in the market from late March into April, ’cause, you know, a lot of the polls to get almost neutral from pretty bullish levels. But I would argue that there’s a lot of people still on the sidelines. A lot of institutions are not, you know, going, you know, fully into the market simply because tech hasn’t really been working that well. But but you know, there’s really a lot of other parts of the market that are doing well. We had some more yesterday saying that a lot of the gains are in the Magnificent 7. We’ve heard that a lot and that was one of the reasons that that, you know, maybe this is questionable. You just said the breath is much better. When did the breath start improving and and what what gives you that? I mean what what’s the, the metric underneath that? Well the breadth was started to be good at the tail end of last year. I mean when when we saw the rally from October into the end of the year, we saw a pretty broad based rally and it’s much much different heading into 2024 than it was of course heading into last year. And so we see you know a lot greater stocks above their longer moving averages. So that’s when I, when I say breadth, I say, you know, when you see more than 3/4 of the market above their longer term 200 day moving averages, that’s normally a pretty good sign for the market. And so it doesn’t. Yes, having technology participate is important, but you know when it doesn’t to see other groups like financials, healthcare and healthcare, you know obviously has been a little bit of a laggard and now that’s starting to show some minor evidence the bottoming out. So you know there’s certain metrics that you can measure breadth when you look at advanced supplies and this and that. But we’re just looking at longer term gauges of of how to look at at the market and you said do you use some technicals on on the 10 year, what what is that indicating to you? Yeah, my, my a lot of the cycles I look at suggests that that the yields are going to start to pull back pretty dramatically between now and August. So the next few months I suspect that that yields can get down well under 4% which would be a surprise to many people. But I think that also means that you know maybe this recent trend of economic softening might continue and and and so we’ll see. You know to me it doesn’t matter how many cuts there are, a lot of that’s irrelevant, but it is you know the the 10 year if it gets under 435 and right now we’re right around four 45450. So it’s it’s we’re getting very, very close to a time when yields are really going to start to pull back a lot more sharply and the dollar should follow suit. So it’s going to be a good time for emerging markets and we’ve seen some initial signs of China starting to bottom and rally up those lows. And you know honestly I’m I’m very optimistic over the next six months. This won’t always be the case but potentially in the next year. But I think for now I’m I’m very bullish this year I think we’re in a sweet spot small caps and mid caps have started to make a little bit of progress off their lows. It’s a long, it’s going to take a bit for those to really you know participate the extent that I think we would all like, but it’s a it’s a moving in the right direction that’s for sure.