The futures markets are in the red this morning, as traders have been reducing their exposure to the markets ahead of inflationary data expected early tomorrow. Stock prices have risen in recent weeks, and the major indices have reached all-time highs over the past few days. Still, the release of core and noncore Personal Consumption Expenditures Indices tomorrow, a favorite inflation indicator of the Federal Reserve, has the potential to shift the outlook for future monetary policy. Traders have sold stocks ahead of this data point. A few areas of the market have been bright, with eBay (EBAY), a large online marketplace, rising in early action due to an increase in its dividend. Additionally, shares of Beyond Meat (BYND), a maker of plant-based meat substitutes, have rapidly increased following a better-than-expected earnings outlook that started a short squeeze (that is, the good news and initial rise in price triggered buying by traders who are “covering their short positions,” thus further increasing the price). The broader market appears likely to start the day on a weak footing. Later today, several Federal Reserve Regional Presidents will give remarks on the economy, which may well affect trading.
The stock market started strongly yesterday, moving higher in the early portion of the trading session based on good earnings results. However, a decline in the consumer confidence index caused the major market indices to dip in the middle portion of the trading session. This move was short-lived, as news broke that U.S. lawmakers were optimistic that a deal could be accomplished to fund the government before the Friday deadline. Apple Inc. (AAPL) stated that it would shut down work on electric vehicles to devote more resources to generative AI (artificial intelligence). These stories helped the markets move higher in the final portion of the trading session. Overall, the S&P 500 increased nine points (up 0.17%), and the NASDAQ rose 59 points (up 0.37%). However, the Dow Jones Industrial Average bucked this trend, falling 97 points (down 0.25%), largely caused by underperformance in a few healthcare-related stocks, such as Amgen (AMGN) and UnitedHealth Group (UNH). Market breadth was somewhat positive, with advancers outpacing decliners by a 1.3-to-1.0 ratio. Utilities were among the best performers on the day, while energy issues were among the weakest, though healthcare equities also finished in the red.
In commodity news, energy prices, such as crude oil and natural gas, rose yesterday as traders are betting that inventories are lower. Demand for jet fuel is expected to increase ahead of the spring break travel season in the United States, which is expected to surpass 2019’s pre-COVID-19 travel levels. Elsewhere, U.S. Treasury bond yields were mixed, with short-term rates rising and long-term rates falling. The Chicago Board Options Exchange Volatility Index, or VIX, commonly known as the fear index, fell yesterday. This level remains slightly higher than recent lows after spiking in mid-February.
A large amount of economic data will be released in the coming days. This includes both personal income and spending, and pending home sales on Thursday. On Friday, the Institute for Supply Management’s manufacturing index and the final University of Michigan consumer sentiment index for February will be released. Additionally, several Federal Reserve Regional Presidents will give remarks on the economy and monetary policy in the days ahead. Elsewhere, a range of mostly smaller companies will post fourth-quarter earnings results and share their outlooks for the year ahead over the next three days. Still, it should be noted we are closer to the end of the earnings season. - John E. Seibert III
At the time of this article’s writing, the author held positions in none of the companies mentioned.
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