The equity futures market is extending yesterday’s losses, as interest rates continue to rise amid rate-hike/inflation concerns. The S&P 500 futures trade 36 points, or 0.8%, below fair value while the tech-heavy Nasdaq 100 futures trade 1.4% below fair value.
Specifically, the 10-yr yield is up eight basis points to 2.63% after starting the month at 2.33%, and the 2-yr yield is up four basis points to 2.55% after starting the month at 2.28%. Treasury yields are at multi-year highs, as is the U.S. Dollar Index (99.50, +0.03, unch).
After hawkish-sounding Fed commentary yesterday fueled the rise in interest rates, investors will pay heed to the FOMC Minutes from the March meeting at 2:00 p.m. ET. On a related note, Philadelphia Fed President Harker (alternate FOMC voter) will speak at 9:30 a.m. ET.
Earlier this morning, the weekly MBA Mortgage Applications Index fell 6.3% following a 6.8% decline in the prior week. WTI crude futures are up 1.6%, or $1.57, to $103.54/bbl ahead of the weekly EIA crude inventory report at 10:30 a.m. ET (Michael Gibbs, Director of Equity Portfolio & Technical Strategy)
The S&P 500 sold off and briefly undercut support at 4522.00 and closed at 4525.12. So far this morning, the index is set to open lower at 4477.00, which would take the index under the 200-day moving average at 4489.25. On Tuesday, Fed Governor Lael Brainard said she expected a combination of interest rate rises and a rapid balance sheet runoff, and the news has raised concerns about higher interest rates. The next level of support could now come in at the 50-day moving average at 4418.33, and we believe that level will hold today.
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 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.