The U.S. stock market seems poised to move higher this morning, as a new week on Wall Street begins. As we were composing this piece, the S&P 500 Index futures were up about 40 points (0.80%), and the NASDAQ futures were also pointing to a strong opening. In the days ahead, investors will turn their attention to the Federal Reserve, a widely-watched technology conference, and profit reports from a handful of leading corporations.
In economic news, this week the FOMC (Federal Open Market Committee) will hold its regularly scheduled two-day policy meeting. On Wednesday afternoon, the event will conclude with a much-anticipated interest-rate decision. Most investors think that the Federal Reserve will choose to leave rates unchanged at this meeting, especially since recent reports have shown that inflation remains somewhat challenging. In addition, Chairman Jerome Powell will be presenting some prepared remarks and conducting a press conference for the financial media. Here, traders will be looking for signs that the Fed is still prepared to reduce rates sometime this year. It should be noted that the stock market has been rallying on the notion that several rate cuts would be forthcoming, and a change to this thesis could create some market volatility. On a positive note, investors may be willing to accept a less accommodative monetary policy if the economy and corporate sector exhibit considerable strength.
On the corporate front, a number of widely-held companies are slated to report their results this week. On Wednesday, we will hear from home builder KB Home (KBH) and semiconductor manufacturer Micron Technology (MU). On Thursday, package delivery giant FedEx (FDX), and athletic wear makers Lululemon Athletica (LULU) and NIKE (NKE) will post their numbers. Furthermore, Wall Street will have an exciting IPO (Initial Public Offering) to watch this week, when Reddit, a social media company, begins trading. It is worth noting that mergers, acquisitions, and IPO’s can often lift investor sentiment further during bull markets.
The stock market has generally performed quite well over the past several months, with no major pullbacks along the way. Under the circumstances, some investors might wonder if further gains are unsustainable without a bout of profit taking. Clearly, it’s hard to predict how the market might perform at any given point in time. However, if history serves as a guide, stocks will correct at some point. Ironically, a pullback will most likely occur just when the bulk of investors have turned extremely bullish. – 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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