The S&P 500 futures trade 31 points, or 0.8%, below fair value as inflation concerns pressure risk sentiment following a big rally effort yesterday.
Target (TGT 166.80, -48.48, -22.5%) is setting the negative tone with a 22.5% decline in pre-market action after missing EPS estimates on above-consensus revenue, citing “unusually high costs” that impacted profitability.
The disappointing news mirrors Walmart (WMT 128.75, -2.60, -2.0%) yesterday and has overshadowed Lowe’s (LOW 188.50, -5.53, -2.9%) earnings beat today. Interestingly, TJX Co. (TJX 57.00, +0.81, +1.8%) is trading higher despite missing revenue estimates and issuing downside Q2 EPS guidance.
Persistently high oil prices ($114.42/bbl, +2.01, +1.8%) have added to inflation concerns while an uptick in long-term interest rates has dovetailed with the inflation-expectations narrative.
The 10-yr yield is up three basis points to 3.00%. The 2-yr yield is up three basis points to 2.70%. The U.S. Dollar Index is up 0.3% to 103.63.
On the data front, investors will receive Housing Starts (Briefing.com consensus 1.775 million) and Building Permits (Briefing.com consensus 1.820 million) for April at 8:30 a.m. ET. Earlier, the weekly MBA Mortgage Applications Index dropped 11.0% following a 2.0% increase in the prior week.
(Michael Gibbs, Director of Equity Portfolio & Technical Strategy)
The S&P 500 has rallied three out of the last four trading days and has potentially formed a V-shaped bottom. The trading came with up volume at 85% of the total volume, which is s good follow-through from Friday’s 95% up volume day. Also, there was a substantial increase in the RSI index and the Advance/Decline indicator. There is not enough evidence to call a bottom, but the index shows increasing signs of strength daily. Today could see some selling as traders potentially look to take some profits off the recent low.
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
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.
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