Morning Brief
Headline News:
The S&P 500 futures trade roughly in line with fair value in a meek start to the month following the beatdown in April.
Growth concerns continue to linger after China’s April Manufacturing PMI (47.4) contracted more than expected and Beijing tightened COVID restrictions, but the market might be drawing support from new inflows on the first trading day of the month. The 3% markdown in oil prices ($101.63, -3.09, -3.0%) is reflecting reduced demand expectations.
There might also be some hesitation about the FOMC’s policy decision on Wednesday, the vast amount of earnings news throughout the week, and key economic data starting with the April ISM Manufacturing Index (Briefing.com consensus 57.9%) at 10:00 a.m. ET and culminating with the April employment report on Friday.
The Construction Spending report for March (Briefing.com consensus 0.8%) will be released concurrently with the ISM report, which will be preceded by the final IHS Markit Manufacturing PMI for April at 9:45 a.m. ET.
The Treasury market has softened up this morning, pushing yields slightly higher. The 2-yr yield is up three basis points to 2.72%, and the 10-yr yield is up three basis points to 2.92%. The U.S. Dollar Index is up 0.4% to 103.38.
(Michael Gibbs, Director of Equity Portfolio & Technical Strategy)
Markets:
The S&P 500 traded sharply lower, moving below support at 4157.87 and closed at 4131.93 on Friday. The Advance/Decline line moved down to the oversold levels that have produced a bounce, and there is a positive divergence in the RSI index that did not set a new low. So, there could still be some oversold bounces this week, but we will stay on the sidelines for now. Potential resistance is now at 4157.87, and possible support could come in at the low for the year on 4114.65 set on 2/24/2022.
We are currently Intermediate-term bearish and short-term bearish.
John N. Lilly III CPFA
Accredited Portfolio Management Advisor℠
Accredited Asset Management Specialist℠
Portfolio Manager, RJFS
Partner, DJWMG
Windsor Wealth Planners & Strategist
Futures trading is speculative, leveraged, and involves substantial risks. Investing always involves risk, including the loss of principal, and futures trading could present additional risk based on underlying commodities investments.
The Relative Strength Index (RSI), developed by J. Welles Wilder, is a momentum oscillator that measures the speed and changes of price movements.
The advance/decline line (A/D) is a technical indicator that plots the difference between the number of advancing and declining stocks on a daily basis. The indicator is cumulative, with a positive number being added to the prior number, or if the number is negative it is subtracted from the prior number.
The A/D line is used to show market sentiment, as it tells traders whether there are more stocks rising or falling. It is used to confirm price trends in major indexes, and can also warn of reversals when divergence occurs.
The percentage of stocks trading above a specific moving average is a breadth indicator that measures internal strength or weakness in the underlying index. The 50-day moving average is used for short-to-medium-term timeframes, while the 150-day and 200-day moving averages are used for medium-to-long-term timeframes. Signals can be derived from overbought/oversold levels, crosses above/below 50% and bullish/bearish divergences.
The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represent approximately 8% of the total market capitalization of the Russell 3000 Index.
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S stock market. Past performance may not be indicative of future results. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investors’ results will vary. Opinions expressed are those of the author John N. Lilly III, and not necessarily those of Raymond James. “There is no guarantee that these statements, opinions, or forecast provided herein will prove to be correct. “The information contained was received from sources believed to be reliable, but accuracy is not guaranteed. Investing always involves risk, and you may incur a profit or loss. No investment strategy can guarantee success. The charts and/or tables presented herein are for illustrative purposes only and should not be considered as the sole basis for your investment decision. International investing involves special risks, including currency fluctuations, different financial accounting standards, and possible political and economic volatility. Investing in emerging markets can be riskier than investing in well-established foreign markets.
This is not a recommendation to buy or sell any company’s stock mentioned above.
US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Bond prices and yields are subject to change based upon market conditions and availability. If bonds are sold prior to maturity, you may receive more or less than your initial investment. Holding bonds to term allows redemption at par value. There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise.