The U.S. stock market will likely get off to a soft start this morning. Overseas, the markets delivered a weak session, and the broader equity futures are currently under some pressure. Looking ahead, this week will likely see traders turn their attention to corporate profits, as the first-quarter earnings season is set to commence. Investors will doubtless want to see how the nation’s leading companies have been holding up in the current challenging environment.
In economic news, there are no major reports due out today, but tomorrow, the Consumer Price Index (CPI) for the month of March will be released. Analysts currently expect prices for the month to display a sizable increase compared to the year-ago period. Inflationary pressures, at first thought to be a transitory problem tied to the coronavirus pandemic, continue to persist. As a result, the Federal Reserve has started to take action and will likely tighten its monetary policy further, with many expecting an additional 50-basis-point interest-rate hike at its next Federal Open Market Committee meeting in May.
On the corporate front, a number of large banks and financial institutions will weigh in with their first-quarter results this week. On Wednesday, we will hear from JPMorgan Chase (JPM), while on Thursday, Wells Fargo (WFC), Goldman Sachs (GS), and Citigroup (C) are slated to post their numbers. It should be noted that most financial institutions conduct business with a range of customers across many different industries, so these reports may prove insightful.
From a technical vantage point, the stock market rallied in late March, but pulled back notably in early April. The recent selling has pushed the S&P 500 Index to its 200-day moving average, situated near the 4,490 level. This area may provide some support, and will likely be watched by traders following technical systems. From a sector perspective, over the past few weeks investors have flocked to healthcare, consumer, and energy names. However, it is not clear if these issues can provide the leadership needed for a sustained market advance. In contrast, the technology sector remains out of favor on Wall Street. Instead, a more conservative style of investing now seems to be in fashion, with value-oriented funds having outperformed growth-oriented vehicles this year, and with the economic backdrop remaining uncertain, this may continue for some time. In addition, stocks that pay dividends may also remain in favor.
– Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
