Morning Brief
Headline News:
The S&P 500 futures are down 14 points and are trading 0.3% below fair value. The Nasdaq 100 futures are down 10 points and are trading slightly below fair value. The Dow Jones Industrial Average futures are down 118 points and are trading 0.3% below fair value.
Stock futures are weak on the heels of yesterday’s FOMC decision and with concerns over the regional bank industry back at the fore. Relative strength in some mega-cap stocks is offering some support to the Nasdaq 100 futures, presumably driven by some flight to safety buying interest.
The Hong Kong Monetary Authority followed the FOMC rate hike with a 25-bps increase to 5.50%, and the Norges Bank raised its deposit rate by 25 bps to 3.25%, as expected. The European Central Bank is also expected to raise its key lending rates at 8:15 ET.
Treasury yields are sharply lower. The 2-yr note yield is down 15 basis points to 3.80%, and the 10-yr note yield is down four basis points to 3.35%.
Market participants will receive the following economic data today:
8:30 ET: Preliminary Q1 Productivity (Briefing.com consensus -0.1%; prior 1.7%), preliminary Q1 Unit Labor Costs (Briefing.com consensus 3.9%; prior 3.2%), March Trade Balance (Briefing.com consensus -$68.7 bln; prior -$70.50 bln), weekly Initial Claims (Briefing.com consensus 245,000; prior 230,000), and Continuing Claims (prior 1.858 mln)
10:30 ET: Weekly natural gas inventories (prior +79 bcf)
(Michael Gibbs, Director of Equity Portfolio & Technical Strategy)
Markets:
The S&P 500 sold off after the Federal Reserve rate announcement and closed lower at 4090.75. The index closed just above the low of 4089.72 on 5/2/2023, so that level will be the first potential support today. RSI also moved lower to support the selling and closed below the 50 level at 49.05. So the S&P 500 is vulnerable to more selling today and possible testing support at 4072.55. We feel that level will hold today if tested.
We are currently Intermediate-term bullish and short-term bullish.
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 stocks 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 on 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.
The Nasdaq 100 (^NDX) is a stock market index made up of 103 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index. It is based on exchange, and it is not an index of U.S.-based companies.