Stocks look set for a positive open on Tuesday after the previous session’s lackadaisical showing. New York Federal Reserve President John Williams, who spoke Monday after the market close, suggested that the banking crisis is not the handiwork of the rate hikes and that there isn’t yet evidence of a tightening of credit conditions.
All eyes are on Wednesday’s consumer price inflation report to get some clarity on the potential rate move in May.
The major averages closed Monday’s trading on a narrowly mixed note, as investors looked ahead to some key economic data points due for the week and a slew of bank earnings slated for Friday.
The three indices opened notably lower but trimmed the losses over the course of the session. The Dow Industrials moved above the unchanged line by the mid-session and spent the rest of the day in positive territory.
The broader S&P 500 gauge sneaked into positive territory, aided by a surge in buying in the final few minutes of trading. Despite recouping much of the early losses, the NASDAQ Composite languished in the red throughout the session before ending marginally lower.
Despite job growth showing some softness, the unemployment rate remains at 50-year lows, providing the Federal Reserve with plenty of room to “stay higher for longer” within their stated goals, said fund manager Louis Navellier.
Therefore, investors trying to time the market for a major rally from rate cuts in 2023 would probably be disappointed, he said. “A relief rally, however, when the Fed announces a pause in further cuts remains quite likely, though maybe short-lived, if unemployment does, in fact, start to rise from 3.5% to 4.5%,” he added.
If results and forecasts from companies confirm that earnings contraction has bottomed in the first quarter, what the Fed does matters less, Navellier said.
“Companies which retain pricing power and are addressing their cost structure will outperform indexes even if the Fed has to go even higher than expected to move closer to their objectives.”
In premarket trading on Tuesday, the SPDR S&P 500 ETF Trust rose 0.20% to $410.44 and the Invesco QQQ Trust moved up 0.16% to $318.39.
The Energy Information Administration will release its short-term energy outlook report at 12 p.m. EDT.
The Treasury is due to auction three-year notes at 1 p.m. EDT.
Philadelphia Fed President Patrick Harker is scheduled to speak at 4 p.m. EDT.
Newmont Corp. pulled back about 1.40% in premarket trading after it raised its offer for Newcrest Mining Limited from $17 billion to $19.5 billion. Tilray Brands, Inc. fell over 5% after the company announced an agreement to buy Hexo Corp. Coinbase Global, Inc. and MicroStrategy, Inc. were all higher, capitalizing on the Bitcoin rally. Albertsons Companies, Inc. and CarMax, Inc. are the notable companies due to report their quarterly results ahead of the market opening.
JPMorgan initiates at Underweight with $11 price target. Morgan Stanley downgrades from Overweight to Equal-Weight and reduces price target from $70 to $60. Nvidia Corp. in KeyBanc maintains an Overweight rating and ups price target from $280 to $320. Advanced Micro Devices, Inc. in KeyBanc maintains an Overweight rating and ups price target from $95 to $110.
“Prices will likely trade in a range due to lack of news on both the supply and demand side. The market continues to be over-supplied while April and May are not very big weather driven demand months,” said Robert DiDona of Energy Ventures Analysis.
Crude oil futures, which pulled back 1.35% on Monday, were seen rebounding on Tuesday. A barrel of WTI-grade crude oil rose 0.33% to $80 in the early European session.
The yield on the benchmark 10-year U.S. Treasury note was 3.398%, down 0.017 percentage points.
Most Asian markets ended Tuesday’s session higher on optimistic expectations concerning a further letup in inflation in the U.S. The Chinese market showed subdued sentiment amid the release of softer domestic inflation data.
European stocks have started Tuesday’s session on a firmer note as the markets in the region reopened after a long weekend.
“We still see the May contract trading range bounded largely by about $1.95 on the downside and $2.25 on the upside,” said Ritterbusch and Associates in a note.
“The expected expansion in the storage surplus, possibly through the rest of this month, is apt to be a bearish dynamic that this gas market will have difficulty ignoring.”
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