The U.S. stock market seems poised for a soft opening this morning, as traders brace themselves for a busy week. Overseas, the markets in Europe have been closed for a holiday, while on our shores the S&P 500 futures have been under some pressure earlier today. This morning investors will be keeping a close eye on the banking sector, given the recent turmoil at First Republic Bank (FRC). Specifically, government regulators recently took control of the bank, selling most of its assets to JPMorgan Chase (JPM). Although the government maintains that the nation’s banking system is sound, the failure of large institutions is not too encouraging and may weigh on investor sentiment.
In economic news, there will be a couple of notable items for investors to digest this week. Most prominently, on Wednesday afternoon, the Federal Open Market Committee (FOMC) will wrap up its two-day meeting with an interest-rate announcement. Fed Chair Jerome Powell will also offer some prepared remarks, followed by a lengthy question and answer session. Many investors expect that the central bank will lift interest rates by another 25 basis points at this time, as inflation remains quite problematic. However, investors also sense that the central bank may be nearing the end of its tightening campaign. For one, interest rate hikes do not have an immediate impact on the economy, so a pause may be warranted. Further, the rapid rise in rates has created stress across the banking sector, and could lead to larger problems in the credit markets. Later in the week, another important report is slated to be released. On Friday morning, the government will publish the monthly employment numbers. Economists expect that approximately 180,000 jobs were added to the economy in April (down from the March figure), while the employment rate probably edged up to the 3.6% mark.
In the corporate arena, the first-quarter earnings season has been uninspiring, so far. Numerous companies have posted weak numbers, while offering soft guidance for the remainder of the year. Tomorrow, we will hear from Starbucks (SBUX) and Advanced Micro Devices (AMD). Later in the week, Apple (AAPL) will weigh in with its report.
From a technical perspective, the S&P 500 Index managed to make some progress during the month of April. However, stocks traded in a choppy fashion and investors seemed to lack conviction. From here, the next major challenge for the bulls will be to push the broader index above the 4,200 level. This area was approached in early February, and represents the high mark for the year.
At the time of this article’s writing, the author had a position in Starbucks (SBUX).
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