Market sentiment seems to have soured following last week’s strong performance by the major averages on hopes of a debt deal. Futures trading indicated a modestly lower open on Monday as the White House and House Republicans keep wrangling over the debt ceiling. The tech sector is also facing negative headlines.
Recapping Past Week’s Trading: In the week ending May 19th, the major averages recorded weekly gains as traders analyzed retail earnings and received indications from both sides of the aisle that a resolution to the debt ceiling impasse could be near.
Although the indices started the week positively, they reversed course on Tuesday due to Home Depot, Inc.’s HD disappointing earnings report and the Commerce Department’s April retail sales data. Stocks rebounded in the following sessions on hopes of a debt deal, only to decline on Friday when the debt limit talks stalled due to disagreements.
By the end of the week, the Nasdaq Composite and the S&P 500 Index had retreated slightly from their highest levels since late August.
| Index | Performance (+/-) | Value | |
|---|---|---|---|
| Nasdaq Composite | +3.04% | 12,657.90 | |
| S&P 500 Index | +1.65% | 4,191.98 | |
| Dow Industrials | +0.38% | 33,426.63 |
Analyst Color:
Despite sizable gains across the major U.S. averages this year, investor sentiment and positioning remain decisively bearish, said Adam Turnquist, chief technical strategist at LPL Financial. The latest 13F holdings show that risk appetite is returning among fund managers, with a noticeable shift in positioning to more cyclical sectors, the analyst said.
He noted that technology stocks were in favor among hedge funds, and financial stocks lost their sheen.
“Given the continued technical progress for the broader market and the potential end to the Fed’s rate hiking cycle, a change in sentiment may be on the horizon, while pressure to cover historically high short positions builds,” Turnquist said.
For the S&P 500 Index, ”it could be a relatively quick trip toward the August highs near 4,300,” he added.
Futures Today
| Index | Performance (+/-) | |
|---|---|---|
| Nasdaq 100 Futures | -0.15% | |
| S&P 500 Futures | -0.06% | |
| Dow Futures | -0.01% | |
| R2K Futures | -0.02% |
In premarket trading on Monday, the SPDR S&P 500 ETF Trust SPY edged down 0.02% to $418.55 and Invesco QQQ ETFQQQ fell 0.14% at $336.03, according to Benzinga Pro data.
Upcoming Economic Data:
The economic calendar of the day is light, as the week is a back-end loaded one. Among the key data due for the week are the minutes of the May Federal Open Market Committee meeting, the second reading of first-quarter GDP data, April personal income and spending data, durable goods orders data and a couple of housing market readings.
A slew of Fed speakers are lined up for Monday:
- St. Louis Fed President James Bullard (FOMC member): 8:30 a.m. EDT
- Dallas Fed President Lorie Logan: 9 a.m. EDT
- Richmond Fed President Thomas Barkin (FOMC member): 10:50 a.m. EDT
- Atlanta Fed President Raphael Bostin (FOMC member): 10:50 a.m. EDT
- San Francisco Fed President Mary Daly (FOMC member): 11:05 a.m. EDT.
These speeches assume importance after Minneapolis Fed President Neel Kashkari, also an FOMC member, reportedly said in an interview that he is open to the idea of moving a bit more slowly from here. The Fed official, however, said he is against any kind of declaration that the central bank is done with its rate hikes.
See also: How To Trade Futures
Stocks In Focus:
- Micron Technology, Inc. MU stock fell more than 6% in premarket trading after China banned the company’s products on Sunday on the pretext of them being security risks.
- Meta Platforms, Inc. META fell after it was fined a record $1.3 billion by European regulators for its handling of user information. The social media giant was also given the ultimatum that it should stop data transfer to the U.S. in five months.
- Nordson Corp. NDSN and Zoom Video Communications, Inc. ZM are among the companies reporting results after the market close.
Commodities, Bonds, Other Global Equity Markets:
Crude oil futures were down 0.20% at $71.55 in early European session. The commodity advanced 2.2% in the past week.
The yield on the benchmark 10-year Treasury note fell 0.033 percentage points to 3.659%.
Most Asian markets advanced on Monday, with the exception of the Australian, New Zealand and Malaysian markets. The Hong Kong and Japanese markets were among the best performers from the region.
U.S. President Joe Biden’s comments at the G-7 meeting that the relationship between the U.S. and China will likely improve provided a shot in the arm for China and Hong Kong stocks. The People’s Bank of China on Monday maintained its prime loan rate unchanged near record lows.
European stocks were seen mixed in late-morning trading on Monday.