The U.S. stock market seems set for a softer start this morning, as the broader equity futures are down about eight points. On our shores, traders will be paying close attention to corporate profits, the inflation outlook, and the Federal Reserve’s monetary policy. Overseas, the war in Ukraine, and China’s struggle to contain the coronavirus pandemic will be primary areas of concern.
In economic news, there will be a few important reports to review this week. Tomorrow, the Commerce Department will release the retail sales figures for the month of April. Here, investors will want to see that the consumer remains upbeat, despite ongoing inflationary pressures and fears about a possible recession. On Wednesday, housing starts and building permits for the latest month will be reported, followed by existing home sales on Thursday. These numbers should command some attention, as the housing market (and several related industries) are instrumental to the general economy. Traders will probably be watching for signs that demand for housing remains intact and can withstand a less attractive mortgage environment.
In corporate news, a number of major retailers will weigh in with their results this week. Tomorrow, we will hear from Walmart (WMT) and Home Depot (HD). On Wednesday, Target (TGT) and TJX Companies (TJX) will post their numbers. Investors will not just be looking at the latest quarterly numbers, but will also be carefully scrutinizing any guidance being provided.
From a technical vantage point, the stock market remains under pressure. However, late last week, the averages managed to stage a sizable rally. Although trading volume was light, the advance did come as a relief, and could signal a shift in investor sentiment. It remains to be seen if traders can push stocks higher in the week ahead, as this would suggest a solid commitment from the bulls. Meanwhile, the broader S&P 500 Index is currently sitting near the 4,000 mark, which is an area that may hold psychological significance with the retail crowd. In addition, it should be noted that many technology names have declined considerably over the past few months, and sentiment has turned from excessive optimism to fear and negativity. Equity valuations have also come down to more reasonable levels. These developments should ultimately lead to a healthier market environment.
– Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
