The U.S. stock market seems poised to rebound this morning, after selling off dramatically last Friday. At the time that we were writing this report, the S&P 500 Index futures were up about 32 points (0.55%) in early morning trading. Futures for the Dow Jones Industrial Average and the NASDAQ were also pointing higher. In the coming days, investors will be looking at a pivotal inflation reading. A few notable corporate profit reports will also be released.
In economic news, there are no important items scheduled for today. However, tomorrow The Conference Board will release the February Consumer Confidence Index, and on Thursday the second estimate for fourth-quarter GDP (gross domestic product) will be reported. Looking ahead, the main event this week will take place on Friday, when the latest monthly PCE (Personal Consumption Expenditures) Price Index will be published. Most analysts expect the numbers to show that prices rose about 2.5% in January, year over year. Clearly, if this report indicates that inflation is starting to rise too much, investors will probably not react favorably.
Meanwhile, fourth-quarter earnings season is still in progress. This week we will hear from Home Depot (HD), Salesforce (CRM), and NVIDIA (NVDA). NVIDIA has emerged as an important technology company, particularly in the burgeoning AI (artificial intelligence) arena, and its report has the potential to move the broader market.
The stock market took a major step back last Friday. The one-day bout of selling erased much of the gains achieved in February, and pushed the S&P 500 Index down to its 50-day moving average, located around the 6,000 level. It is worth mentioning that this area corresponds to a large round number, and may hold psychological significance for traders. From a sector perspective, there has been some sector rotation taking place in the market over the past few weeks. The technology issues, which had provided leadership in the past, have now fallen out of favor. Meanwhile, other equity groups, like healthcare, materials, real estate, and consumer staples, have started to become more attractive. This dynamic may suggest that investors are becoming more cautious. The price of gold (GLD) continues to climb higher, and silver (SLV) is also starting to advance. In addition, traders looking for safety and income appear to be more interested in the fixed-income markets lately. – Adam Rosner
At the time of this article’s writing, the author had a position in NVIDIA.
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