The U.S. stock market may get off to a soft start this morning, as traders digest the technology led selloff that occurred last Friday. As we were writing this article, the S&P 500 Index futures were down about 17 points (-0.35%) in early morning trading. This week, investors will receive a critical inflation report, the monthly retail sales numbers, as well as a handful of corporate earnings reports.
In economic news, today should be relatively quiet. However, tomorrow the Consumer Price Index (CPI) for the month of February will be published. Most analysts think the report will show that prices rose about 3.1% during the month, on a year-over-year basis. Although inflation remains difficult to tame, economist still think prices are becoming more manageable and pose less of a threat to the broader economy. On Thursday, retail sales for the month of February are set to be released. Here, analysts are looking for sales to rebound nicely, following a soft showing in January. A positive sales report may help lift investor sentiment, as the retail sector is such a vital part of the economy.
In corporate news, there are a few important companies reporting results this week. In the retail industry, we will hear from William-Sonoma (WSM), Dollar General (DG), and DICK’S Sporting Goods (DKS), along with some others. In the technology category, reports from Oracle (ORCL) and Adobe (ADBE) will be closely watched, especially given investors’ intense focus on AI (artificial intelligence) applications. Some positive reports from these technology leaders would be a plus and might even help lift the overall market.
The stock market has been making notable progress this year, with the S&P 500 Index already ahead more than 8%. At this juncture, traders may worry that some pronounced profit taking, or an even larger correction, might lay ahead. It is not clear what event could cause the market to meaningfully reverse course. However, it should be noted that investors are operating under the assumption that the Federal Reserve will soon reduce interest rates, and stocks could react strongly if that scenario fails to materialize. Elsewhere, market dynamics finally seem to be shifting, which could be a constructive development. Specifically, investors have started to rotate capital away from the large technology names, many of which have reached elevated valuations, and into overlooked small and mid-sized issues. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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