The S&P 500 futures are peeling back yesterday’s relief rally and currently trade 20 points, or 0.5%, below fair value.
Yesterday, the market was relieved to hear that the Fed was not considering hiking rates by 75 basis points in coming meetings, preferring instead 50-basis-point increases in the next two meetings. On a related note, the Bank of England on Thursday increased its Bank Rate by 25 basis points to 1.00%, as expected.
Some of the enthusiasm has been dialed back this morning, partly because of profit-taking interest from cautious-minded investors and an understanding that the Fed is more concerned with inflation than economic growth right now.
In addition, Treasury yields are creeping higher after dropping in yesterday’s session while investors digest some mixed earnings news, including disappointments from eBay (EBAY 50.22, -4.20, -7.7%) and Etsy (ETSY 95.50, -13.83, -12.7%).
The 2-yr yield is up seven basis points to 2.68%, and the 10-yr yield is up four basis points to 2.96%. The U.S. Dollar Index is up 0.6% to 103.22. WTI crude futures are up 0.8% to $108.57/bbl in front of an OPEC+ production decision.
On the data front, investors will receive the weekly Initial Claims (Briefing.com consensus 184,000) and Continuing Claims report and preliminary Q1 readings for Productivity (Briefing.com consensus -2.8%) and Unit Labor Costs (Briefing.com consensus 7.3%) at 8:30 a.m. ET.
(Michael Gibbs, Director of Equity Portfolio & Technical Strategy)
The S&P 500 rallied sharply after Fed Chairman Powell’s testimony and the index closed higher at 4300.17. The trading came with higher volume at 2,871,457,280 shares traded, and RSI moved higher in support of the rally closing at 47.68. The Advance/Decline line also increased sharply, and advancing issues were 82% of the trading volume. The index has now rallied for three days, and a pause would be typical today. However, another rally with 80% or more of advancing issues could see the start, potentially, of a new uptrend. We will remain cautious until we see that the three-day rally was not an oversold bounce.
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.
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.