The U.S. stock market seems set to move higher at the opening bell today, after an eventful weekend. Late Saturday, tensions in the already fragile Middle East reached a tipping point after Iran launched a barrage of drones and missiles at Israel. Fortunately, a major crisis was averted, and the situation seems to have stabilized, at least for now. Clearly, a major military conflict in the region could impact the global economy and create volatility across the energy sector. As we were writing this report, the price of crude oil was trading near $85 per barrel. The S&P 500 Index futures were ahead roughly 30 points (0.55%).
This morning, the latest U.S. retail sales report was released. In March, sales increased 0.7% from the prior month, which slightly exceeded expectations. Traders are probably pleased to see that the consumer and the broader economy are still in good shape. However, numbers that are too strong could undercut hopes for an interest-rate cut. Notably, the recent data suggest that inflation may still be somewhat problematic. This, along with a strong labor market, are making it difficult for the Federal Reserve to lower interest rates at this time. Elsewhere this week, a handful of Federal Reserve officials, including Chairman Jerome Powell, will present speeches at various functions, and Wall Street will be closely following these comments.
In corporate news, the first-quarter earnings season has just started. This morning, Goldman Sachs (GS) delivered a strong profit report, and the news should help lift investor sentiment. Later this week, we will hear from Bank of America (BAC), Morgan Stanley (MS), and American Express (AXP). In addition, a report from Netflix (NFLX) should receive some attention from traders.
Technically, the stock market has pulled back a bit since the start of April. The S&P 500 Index is currently sitting at its 50-day moving average, located at around the 5,110 level. Traders following technical systems may be looking for the 5,110 area to provide some support. From a sector perspective, over the past few weeks we have seen capital rotate into energy and basic materials issues, while the major technology stocks have become less important. It is not clear if this change in leadership is temporary, and what it might mean for the stock market going forward. – 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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