Optimism in the Air:
U.S. stock futures experienced a notable increase on Monday, following a long holiday weekend. The uptick was fueled by the latest inflation figures for February, which indicated a less-than-expected price hike, keeping the possibility of a June interest rate cut by the Federal Reserve very much alive.
Global Manufacturing Insights:
The positive mood was further bolstered by promising Chinese PMI data, revealing that manufacturing activity expanded for the first time in half a year. This development sets a hopeful tone as Wall Street steps into the second quarter, despite the expectation of lighter trading volumes due to the Easter holiday closures in several major markets, including Australia, Hong Kong, the United Kingdom, and Germany.
Economic Indicators Awaited:
Investors now turn their attention to the ISM manufacturing PMI data for March, anticipating signs of a “soft landing” for the U.S. economy amidst ongoing adjustments and expectations.
A Strong Start to the Year:
The U.S. stock market has seen a robust beginning to 2023, propelled by the surge in artificial intelligence-related stocks and the anticipation of forthcoming Fed rate cuts. The first quarter witnessed impressive gains across the board, with the S&P 500 leading the charge with its most significant first-quarter increase since 2019.
The Fed’s Influence:
The Federal Reserve’s future decisions remain a pivotal factor for the market’s trajectory. Initial expectations of six rate cuts have been adjusted to three, as Fed officials have yet to indicate a significant enough reduction in inflation to warrant a cut. The market’s momentum in the upcoming quarter may well hinge on these decisions, alongside the upcoming corporate earnings season.
Gold Hits Record High:
Monday also saw gold prices reaching unprecedented levels, driven by the softer U.S. inflation data and the growing bets on a June rate cut by the Fed. This surge in gold prices reflects the market’s rate-cut expectations, safe-haven demand, and central bank purchases, marking gold’s most substantial monthly rise in over three years.
Microsoft Adjusts Teams Strategy:
In corporate news, Microsoft announced plans to sell its Teams chat and video app separately from its Office suite globally. This move, initially made in Europe to avoid potential EU antitrust fines, now extends worldwide, offering more flexibility to multinational companies.
Oil Prices on the Rise:
Oil prices edged higher, buoyed by the optimistic manufacturing data from China and ongoing concerns over tight supplies. With China’s manufacturing sector showing signs of expansion and OPEC+ extending production cuts, the oil market remains supported, continuing its upward trend from the past three months.
SPY/ SPX- Last Week, we highlighted the importance of the 5255 FOMC breakout point, stating that “If buyers can defend this prior breakout point, price can retest 5325, 5350, and 5400.“ It was a rather slow shortened trading week, with holiday volume and a lack of catalysts. This resulted in an inside bar on the weekly timeframe chart, with pricing moving 1/2 of its usual weekly range.
For this week, many of the same levels will be on watch, as price continues to trade in the same relative location. The specific focus for this coming week will be how price trades versus last week’s “inside week,” which means particular attention will be paid to last week’s high and low. If buyers can continue to defend the prior breakout point, at 5255 price can retest 5325, 5350, 5400, and 5420. If buyers fail to defend the prior breakout point at 5255, it would result in a failed breakout and price could test 5200 and 5165. Of note, April is a seasonally bullish period.
Upside levels of interest: 5325, 5350, 5400, 5420
Downside levels of interest: 5255, 5200, 5165
Notable Economic Data
- Wednesday: Powell Speech
- Thursday: Jobless Claims
- Friday: Non-Farm Payrolls
Todays Upgrades- Devon Energy (DVN) upgraded by Wells Fargo from Equal Weight to Overweight
- Nuvalent (NUVL) upgraded by Leerink from Market Perform to Outperform
- TransUnion (TRU) upgraded by BofA from Underperform to Neutral
- Healthpeak Properties (DOC)upgraded by BofA from Underperform to Buy
- Premier Financial (PFC) upgraded by Hovde Group from Market Perform to Outperform
- Adyen (ADYEY) upgraded by Evercore ISI from In Line to Outperform
- Assured Guaranty (AGO)downgraded by Keefe Bruyette from Outperform to Market Perform
- WillScot Mobile Mini (WSC)downgraded by Jefferies from Buy to Hold
- C.H. Robinson (CHRW) downgraded by Barclays from Equal Weight to Underweight
- J.B. Hunt (JBHT) downgraded by Barclays from Overweight to Equal Weight
- Werner (WERN) downgraded by Barclays from Overweight to Equal Weight
- Fifth Third (FITB) downgraded by Baird from Outperform to Neutral
- Oxford Industrie (OXM) downgraded by Citi from Neutral to Sell
- Bill (BILL) downgraded by Wells Fargo from Equal Weight to Underweight
- Sharecare (SHCR) downgraded by BTIG from Buy to Neutral
- Molina Healthcare (MOH)downgraded by BofA from Neutral to Underperform
- Galapagos (GLPG) downgraded by BofA from Neutral to Underperform
- Texas Capital (TCBI) downgraded by Truist from Buy to Hold
- Landos Biopharma (LABP)downgraded by H.C. Wainwright from Buy to Neutral
- Cognizant (CTSH) downgraded by Susquehanna from Positive to Neutral
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