U.S. Stock Futures Point Higher
U.S. stock futures were broadly higher on Monday, signaling an extension of the previous session’s rally that propelled the Dow Jones Industrial Average to its first-ever close above 40,000. Recent economic data suggesting a possible cooling in the U.S. economy has alleviated some inflation concerns, fueling hopes that the Federal Reserve might reduce interest rates from their two-decade highs as early as September. Alongside the Dow, the S&P 500 and Nasdaq Composite also reached record highs last week.
The resilience of Wall Street’s strength will be tested this week by a fresh batch of corporate earnings, including a much-anticipated report from Nvidia. Additionally, durable goods and consumer sentiment data will be in focus as markets look for further evidence that economic growth is moderating enough to justify rate cuts from the Fed this year.
Nvidia Earnings in the Spotlight
Nvidia is set to headline the earnings calendar this week, with traders eager to see if the AI-specialized graphics processing unit maker will once again report surging revenues, particularly in its data center unit. Nvidia’s shares have soared nearly 92% this year, driven by the AI boom. In February, Nvidia projected first-quarter revenues of $24 billion, with CEO Jensen Huang noting that “accelerated computing and generative AI have hit the tipping point.”
Huang’s comments will be closely watched, especially as Nvidia faces competition from rival chipmakers like Intel and AMD, as well as supply chain constraints and geopolitical tensions affecting AI chip exports to China. Additionally, tech giants like Alphabet and Amazon are reportedly developing their own AI chips, potentially reducing their reliance on Nvidia.
Fed Speeches and Minutes on Tap
Several Federal Reserve officials are scheduled to speak on Monday, potentially offering insights into the central bank’s future monetary policy. Fed board members Christopher Waller, Philip Jefferson, and Michael Barr will deliver speeches at separate events.
Later in the week, the Fed will release minutes from its April 30-May 1 meeting, during which Chair Jerome Powell indicated that interest rates are likely to stay high due to persistent inflationary pressures. However, recent data showing slower-than-expected consumer price increases and a weaker labor market report have fueled bets that the Fed will implement two 25-basis point rate cuts this year. Currently, rates stand at a 23-year high of 5.25% to 5.5%.
China Keeps Loan Prime Rate Unchanged
The People’s Bank of China (PBOC) maintained its benchmark loan prime rate (LPR) unchanged on Monday, as expected, despite continuing other stimulus measures to support the economy. The PBOC kept the one-year LPR at 3.45% and the five-year rate, which influences mortgage rates, at 3.95%.
Both rates remain at record lows as Beijing aims to bolster economic growth by maintaining loose monetary conditions. Meanwhile, Hong Kong-listed shares of mainland Chinese property developers fell despite Beijing’s recent measures to support the struggling industry, including easing home buying restrictions and providing funds for local governments to purchase real estate from developers.
Crude Prices Gain Amid Iran Uncertainty
Crude prices edged higher on Monday, adding to last week’s gains amid uncertainty surrounding the political situation in the Middle East following reports of Iranian President Ebrahim Raisi’s death. By early morning, U.S. crude futures (WTI) were up 0.3% at $79.81 per barrel, while Brent crude rose 0.3% to $84.23 per barrel.
Brent ended the previous week with a 1% gain, its first in three weeks, while WTI climbed 2%, boosted by positive economic indicators from the U.S. and China, the world’s largest oil consumers. Iranian state media reported that Raisi, considered a potential successor to Supreme Leader Ayatollah Ali Khamenei, died in a helicopter crash on Sunday in a remote region of northwestern Iran.
SPY/ SPX- Last week the main watch heading into the week was how price traded versus 5230. On Tuesday, that level was tested with a weekly low being formed at 5216.75. Unsurprisingly, buyers were responsive to this level, and the leg higher continued with a move up and through 5333, which was the previous all-time high.
For this week, the main watch will be how price trades versus the 5333 level, which was the previous all-time high. Holding above 5333 would suggest that the recent strength will continue, and price would target 5350, 5385, and 5435. If a break and hold below 5333 is seen, price will target 5300, 5270, and 5250. Of note, given the recent expansion move, it should not be surprising to see price continue to take a breather (via consolidation) near the current spot.
Upside levels of interest: 5350, 5385, 5435
Downside levels of interest: 5300, 5270, 5250
Notable Economic Data
- All week: Fed SpeakÂ
- Wednesday: 20Y Auction, FOMC Minutes
- Thursday: Jobless Claims, 10Y Auction
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