The U.S. stock market is positioned to move lower this morning, as a new week on Wall Street gets started. Specifically, the broader equity market futures are currently down roughly 35 points, implying some softness at the opening bell. Traders seem to be in need of some clarity at this juncture. Late last week, sentiment turned negative after Federal Reserve Chairman Jerome Powell issued hawkish remarks that clearly surprised overly bullish traders.
On the economic front, the main event will take place at the end of the week. Friday morning the government is slated to release the August employment report. No doubt, investors will be paying close attention to this issuance, as the nation’s employment situation is closely watched by the Federal Reserve, and may influence monetary policy. The central bank’s main goal is to control inflation, which has been a persistent problem. Some progress has been made in recent months, but it should be noted that prices across many categories remain elevated, and the Fed has vowed to remain vigilant.
In corporate news, numerous retailers continue to post their results. This week, we will hear from Best Buy (BBY), a major retailer of electronics and accessories. In addition, Five Below (FIVE), a deep discount operator, will weigh in with its numbers. Consumers are a central part of the broader economy, and Wall Street will be looking at these reports to see that confidence and spending remain at healthy levels. The combination of a softer economy, inflationary pressures, and rising interest rates will most probably create challenges for many shoppers.
From a technical vantage point, the S&P 500 Index has pulled back over the past several sessions. However, consolidation at this point seems reasonable, given that the market rebounded sharply since mid-June with little profit taking along the way. In addition, it should be noted that the economic backdrop and the corporate outlook remain uncertain, and many challenges still need to be resolved. Looking ahead, it is hard to know how much further the current stock market pullback will extend. Traders that adhere to technical systems may be looking for the broader average to find support near the 4,000 level, which corresponds to the 50-day moving average. However, timing the market is difficult, and probably not even possible, for many investors.
– Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
