Before The Bell
The U.S. stock market retreated yesterday, with continued softness in many of the technology issues. This dynamic market sector seems to have lost its leadership position lately. Some of the weakness reflects concerns about inflationary pressures and the possibility of higher interest rates. Elevated equity valuations have also been playing a role. In contrast, the energy and basic materials issues have become more popular, as traders may be anticipating higher levels of capital spending and increased investment in infrastructure projects. Overnight, the international markets put in a constructive session. In Asia, the Nikkei traded nicely higher. In Europe, the FTSE 100 made some progress. On our shores, the S&P futures are currently higher by about 10 points, suggesting a slightly positive start to today’s session.
Meanwhile, the first-quarter earnings season has largely ended. Of note, the majority of companies posted greatly improved results, aided by the reopening of the economy. At this point, we are starting to hear from some of the large retailers. This morning, Walmart (WMT), Home Depot (HD), and Macy’s (M) weigh in with favorable numbers. No doubt, these reports will be widely followed, as the retail sector and consumer spending remains an important part of the broader economy.
In economic news, the housing market will be an area of concentration this week. Yesterday, the National Association of Home Builders (NAHB) Index was released. This report was generally favorable, suggesting continued strength in the real estate markets. Today, we get a look at housing starts and building permits for the month of April. At the end of the week, the existing home sales numbers will be published. These items will likely receive attention from traders, as the housing market fuels much of the economy and is tied into many other industries.
Technically, the S&P 500 Index has been a bit choppy over the past several days. Last week, the broad index moved to record higher ground, but then pulled back, touching the 50-day moving average, located at about the 4,070 level. This area, which is followed by traders, provided some support. Although this was encouraging, it remains to be seen if the bulls can mount an extended buying campaign from here. Given the gains in the market over the past year, some consolidation is certainly understandable at this point and may even be a healthy development.
– Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
