The U.S. stock market is poised for a lackluster start this morning, as traders return from the holiday weekend.
Over the next few days, the first-quarter earnings season will continue to unfold, and investors will be look for signs that major corporations can still make progress, despite the challenges caused by ongoing supply-chain disruptions and mounting inflationary pressures. Last week, we heard from JPMorgan Chase (JPM) and Goldman Sachs (GS). Today, we get a look at reports from Bank of New York Mellon (BK) and Bank of America (BAC), while tomorrow, Johnson & Johnson (JNJ) and Lockheed Martin (LMT) are set to weigh in with their numbers.
In the economic arena, however, over the next few days the spotlight will be not on earnings, but rather the housing market. Today, the NAHB (National Association of Home Builders) Housing Market Index for the month of April will be released, while tomorrow, housing starts and building permits for March will be reported, followed by the latest existing home sales figures on Wednesday. Of note, the Federal Reserve’s tighter monetary policy has already started to send mortgage rates higher, and this development may well continue, given the current outlook. Generally, when access to capital becomes constrained, home buyers turn cautious about making large purchases. Financing construction projects can prove challenging, as well. A potential slowdown is of concern, as the real estate markets are tied to numerous industries and are an essential part of the nation’s economy.
From a technical perspective, the stock market pulled back sharply during the first part of April and has shown few signs of stabilizing. However, the S&P 500 Index is now sitting near its 50-day moving average, located around the 4,400 level, and this widely watched area may provide some support. It should also be noted that corporate profits could serve as a positive catalyst for the market, assuming that the results surpass expectations. Further, the Federal Reserve may turn out to be less aggressive than investors have been expecting, which would be a major relief. Finally, it is also worth mentioning that inflation has been a challenge, but prices for energy and other commodities, in particular, have been a major part of the problem. A more stable outlook in the energy patch would clearly constructive.
– Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
