The U.S. stock market is positioned for a positive start this morning, as traders look ahead to a busy week. Of note, the markets in Europe have been putting in a constructive session, and on our shores the broader equity futures are currently ahead about 18 points.
In economic news, the Federal Reserve will be back in the spotlight this week. Specifically, the Federal Open Market Committee (FOMC) will wrap up its two-day policy meeting on Wednesday afternoon. At that time, an interest-rate decision will be announced, and some prepared remarks will be delivered. Most traders are currently expecting that a 75-basis-point rate hike will be approved, which makes sense given that inflation remains an ongoing problem. Meanwhile, it should be noted that changes to monetary policy can take some time to implement, and may not immediately lead to concrete results. Consequently, the central bank must act carefully, so as to avoid pushing the economy into a prolonged recession. Further, in the energy sector, elevated oil and gas prices reflect a complex set of global issues, such as the war in Ukraine, and the decisions of major energy producers. Here, the Federal Reserve’s set of tools may be limited to some degree.
In the corporate arena, the second-quarter earnings season is now in progress. Today, NXP Semiconductors (NXPI), an important technology name, weighs in with its report. Tomorrow, we will hear from a diverse collection of companies, including Alphabet (GOOG), Microsoft (MSFT), and General Motors (GM). Investors have probably already lowered their expectations, given that the economic outlook has softened, and many companies have already issued cautious remarks. Nonetheless, sizable profit shortfalls and disappointing guidance will probably not be well received by investors in the current climate.
From a technical vantage point, the market has been acting somewhat better lately. Over the past several sessions, the S&P 500 Index has managed to move higher, and is now back above its 50-day moving average (located near the 3,920 mark). Also, sentiment seems more supportive. Traders seem more willing to assume risk, and have been gradually moving capital into dynamic parts of the market, such as the technology sector. The next challenge for the bulls will be pushing the broader market index firmly past the 4,000 level. This area may be of some psychological importance, and could present some resistance.
− Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
