First Step Should Be Incrementally Positive

Articles From: Briefing.com
Website: Briefing.com

By:

Chief Market Analyst

The bulls are slated to have first-mover advantage to begin the week.

Currently, the S&P 500 futures are up nine points and are trading 0.2% above fair value, the Nasdaq 100 futures are up 31 points and are trading 0.2% above fair value, and the Dow Jones Industrial Average futures are up 61 points and are trading 0.2% above fair value.

This positive bias is an offshoot of several influences:

  • The People’s Bank of China added some liquidity by rolling over CNY125 billion of maturing medium-term loans
  • The EU Commission raised its 2023 growth forecast to 1.1% from 0.9% and its 2024 growth forecast to 1.6% from 1.5%
  • NEC Director Lael Brainard said debt ceiling discussions have been productive; meanwhile, Treasury Secretary Yellen said both sides have found some areas of agreement, according to CBS News
  • Several M&A deals have been announced, highlighted by Newmont’s (NEM) approximately $19 billion cash-and-stock deal to acquire Newcrest and Onoeok’s (OKE) approximately $18.8 billion deal, including assumed debt, to acquire Magellan Midstream Partners (MMP)

Positive price action in Asian and European equity markets has set a constructive tone ahead of the U.S. open, which will feature some buy-the-dip action coming off last week’s modest losses. Nonetheless, it won’t be an aggressive bid at the open.

An ugly New York Fed Empire State Manufacturing Survey for May tamped down some of the stronger enthusiasm seen earlier. The ugliness came in the headline print of -31.8 (Briefing.com consensus -1.8) versus 10.8 in April. The dividing line between expansion and contraction for this survey is 0.0.

The key takeaway from the survey is that the new orders index sank 53 points to -28.0, underscoring a sharp drop off in demand in May.

Granted this is a lower-tier report, yet this is the the type of data that should give the Fed some pause about raising rates further. Both Atlanta Fed President Bostic (non-FOMC voter) and Chicago Fed President Goolsbee (FOMC voter) suggested to CNBC this morning that it is prudent now to take a wait-and-see stance on policy. Mr. Bostic added, though, that rate cuts are not part of his baseline forecast.

There will be more data this week, including the Retail Sales, Housing Starts, and Existing Home Sales reports for May, that will factor into the Fed’s thinking. Separately, we will also hear several retailers, including Home Depot (HD), Target, (TGT), and Walmart (WMT), report their quarterly earnings results.

Debt ceiling discussions — or at least reports about debt ceiling discussions — are apt to feature prominently this week as well.

Originally Posted May 15, 2023 – First step should be incrementally positive

Join the Discussion

Thank you for engaging with IBKR Campus. If you have a general question, it may already be covered in our FAQs. If you have an account-specific question or concern, please reach out to Client Services.

Your email address will not be published. Required fields are marked *

Disclosure: Interactive Brokers

Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Briefing.com and is being posted with its permission. The views expressed in this material are solely those of the author and/or Briefing.com and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.