Morning Brief
Headline News:
Equity futures point to a mixed opening this morning after the major averages took a step back yesterday amid a poor day for tech and mega-cap stocks.
Software, semiconductors, and other tech names faced a retreat that bled into other growth areas and saw the S&P 500 dip below its 50-day moving average before finding some support, while the NASDAQ Composite closed below its own 50-day moving average.
Headlines are fairly quiet this morning, though investors are currently receiving another sizable batch of earnings reports. One of the world’s largest Communication Services companies reports after the close today, while one of the world’s largest Consumer Discretionary companies reports tomorrow, amid what has been a tough week so far for the mega-caps.
The market will also receive several economic data releases this morning, including the January ADP Employment Change Report (Briefing.com consensus 43k) at 8:15 a.m. and the January ISM Non-Manufacturing Index (Briefing.com consensus 53.7%) at 10:00 a.m. The MBA Mortgage Applications Index for the week ended January 31 decreased 8.9% from a prior decrease of 8.5%.
(Michael Gibbs, Managing Director, Lead Portfolio Manager |)
Markets:
The S&P 500 traded in a wide range and closed sharply lower at 6,917.81. The index tested resistance at 6,986.33 but failed to break through, ultimately closing below the 20-day moving average. The RSI also moved lower and is now hovering just above the critical 50 level, suggesting weakening short-term momentum.
The 6,986.33 resistance level has proven difficult to breach, and a meaningful positive catalyst will likely be required to sustain a move above it. With fourth-quarter earnings season winding down, such a catalyst may be harder to find in the near term. That said, we remain hopeful the S&P 500 can base at these levels and consolidate recent gains through the remainder of the week.
We are currently Intermediate-term cautious 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 & Strategists
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 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 averages are used for short-to-medium-term timeframes, while the 150-day and 200-day moving averages are used for medium-to-long-term ones. 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 represents 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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The Russell 2000 Index is a stock market index that measures the performance of the 2,000 smaller companies included in the Russell 3000 Index. It is managed by London’s FTSE Russell Group and is widely regarded as a bellwether of the U.S. economy because it focuses on smaller companies that focus on the U.S. market.