Futures are trading slightly in the green this morning, following the stock market indices reaching their highest levels of 2023 yesterday. Little in the way of earnings or U.S. economic news has hit the tape this morning, but a report from China showed exports declined 7.5% in May, while imports there decreased 4.5% .This showed less trade with Japan and the United States, as those economies have slowed. Still, traders have taken this in stride, and futures prices suggest a positive start to the trading day.
The stock market traded well yesterday, benefiting from tailwinds related to the resolution of the debt ceiling concerns. The markets moved higher through the day, ending not far off their highs, and reaching levels not hit since August of 2022. Overall, the S&P 500 rose 10 points (up 0.24%), the NASDAQ increased 47 points (up 0.36%), and the Dow Jones Industrial Average finished up 10 points (up 0.03%). Market breadth was quite positive, as advancers outpaced decliners by a 3.7-to-1.0 ratio. Consumer discretionary equities were among the best performers, while healthcare stocks were among the weakest. These moves suggest that traders are moving into sectors more affected by the economic cycle.
In commodity news, oil prices rose through the day yesterday, further benefiting from the news announced on Monday that Saudi Arabia would cut production by one million barrels in July. Meantime, U.S. Treasury bond yields were mixed, with short-term rates rising and long-term ones declining. The yield curve remains heavily inverted, which usually portends a coming recession. A vast majority of traders are pricing in no interest rate hike at the Fed Open Market Committee’s June meeting next week, though a small contingent expects another 25-basis point hike. The Chicago Board Options Exchange Volatility Index, or VIX, commonly known as the fear index, continued to decline as traders priced in less future volatility and increased their appetite for risk.
A few economic reports will be released in the days ahead. These include initial jobless claims and wholesale inventories for April on Thursday. Elsewhere, several dozen earnings reports will be released over the coming days by mostly smaller companies, while bigger outfits have nearly all closed their first-quarter books. Overall, we think that most eyes will be looking toward any data that will affect next week’s Federal Reserve interest rate policy decision.
At the time of this article’s writing, the author did not hold any positions in the companies mentioned.
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