Morning Brief
Headline News:
Equity futures point to a modestly higher open to start the week following a mixed finish for the major averages last week, which featured considerable selling pressure across the AI trade and pronounced shifts in market leadership.
Some relief is coming from the energy market this morning, with WTI crude futures down $2.17 (-2.1%) to $101.15 per barrel after settling sharply higher on Friday. The pullback is helping support equity futures by easing some of the concerns surrounding elevated energy costs and their implications for inflation. Investors face another busy week of third-quarter earnings, with several of the Mag 7 companies scheduled to report. Their results will be particularly important for assessing AI spending commitments and the returns being generated from those investments following last week’s volatility.
On the policy front, the FOMC will announce its latest interest rate decision on Wednesday. The CME FedWatch Tool currently assigns a 90.6% probability that the Fed will leave rates unchanged, putting the focus on policymakers’ commentary regarding the outlook for inflation and future policy decisions.
(Michael Gibbs, Managing Director, Lead Portfolio Manager )
Markets:
The S&P 500 sold off sharply, testing key support at 7,616.78, where buyers stepped in and helped the index recover modestly before closing lower at 7,632.68. Both the RSI and Advance/Decline line finished lower, confirming continued selling pressure and a lack of broad market participation. The S&P 500 is now at a critical technical juncture, with a sustained rally back above the 50-day moving average at 7,699.64 needed this week to improve the near-term outlook. Attention now turns to the Federal Reserve’s interest rate decision later this week, with a 25-basis-point rate hike anticipated.
We believe such a move could actually prove bullish for equities, particularly if accompanied by reassuring commentary from the Fed. The recent decline in the U.S. 10-year Treasury yield suggests that bond investors may have already priced in the anticipated rate increase. Trading today could remain relatively muted as investors await the Fed’s announcement and further clarity on the direction of monetary policy.
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 due to underlying commodity 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 the underlying index’s internal strength or weakness. 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 represents approximately 8% of the Russell 3000 Index’s total market capitalization.
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 by the federal government’s timely payment of principal and interest. 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 comprising 103 equity securities of 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index. It is based on exchange and not an index of U.S.-based companies.
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 tracks smaller companies that operate in the U.S. market.
The NYSE advance/decline measure refers to the number of common stocks listed on the New York Stock Exchange (NYSE) that close at a higher price than their previous closing price (“advancing issues”) compared to the number of NYSE-listed common stocks that close at a lower price than their previous closing price (“declining issues”) during a specified trading session.
This measure serves as an indicator of market breadth and reflects the extent to which price movements are broadly distributed across NYSE-listed securities.