The U.S. stock market seems to be headed for a soft start today, as a volatile week on Wall Street draws to a close. Notably, sentiment may be turning more cautious, as investors struggle to guess the Federal Reserve’s next move. As we were writing this report, the S&P 500 Index futures were under pressure in early morning trading.
In economic news, the Federal Reserve has been in the spotlight for much of this past week. Over the last few days, several central bank officials have made various speeches, expressing views about the economy, inflation, and monetary policy. In addition, Chairman Jerome Powell recently testified before Congress, stressing that the central bank is committed to battling inflation, and that additional interest-rate hikes would likely be forthcoming in the months ahead. Some traders seem to be shrugging off that message, while others appear more concerned. Looking ahead, it remains to be seen if prices will continue to moderate and inflation will come closer to the Federal Reserve’s 2% target range. Next week, the PCE (Personal Consumption Expenditures) Price Index for the month of May will be published. That report should provide some much-needed information.
In corporate news, there are few widely-followed companies posting reports today. Next week we will hear from Walgreens Boots Alliance (WBA), General Mills (GIS), and Micron Technologies (MU). These are relatively large companies, and their results will be closely followed by traders. Meanwhile, it should be noted that the month of June is drawing to a close, and the second-quarter earnings season will soon commence. Given the level of the current stock market, investors probably won’t be pleased if too many companies deliver weaker-than-expected guidance.
From a technical vantage point, the S&P 500 Index recently hit resistance near the 4,450 level. This development was not surprising, given the gains that the market has logged over the past several weeks. At this point, it remains to be seen if a deeper pullback will unfold, or if the bulls can push stocks higher from here. It is encouraging to see traders moving capital into the small-and mid-cap issues that had been out of favor earlier this year. This rotation of capital may support the market, especially if the popular technology issues become too extended and traders start to look elsewhere. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
CLICK HERE for more information on our services or call 1-800-VALUELINE (1-800-825-8354). Our account managers are available Monday through Friday, 8:00 AM to 6:00 PM Eastern Time.
