Market Driving Toward Important Intersection

Articles From: Briefing.com
Website: Briefing.com

By:

Chief Market Analyst

The stock market is approaching an important intersection. The S&P 500 can see 4,200 straight ahead, but as of yet it doesn’t know if the light will be green, yellow, or red when it gets there.

We saw all those lights yesterday; however, the S&P 500 and the other indices finished on a green light that had them speeding to their highs of the session into the close.

Today the market is poised to get a green light at the open. Currently, the S&P 500 futures are up 18 points and are trading 0.5% above fair value, the Nasdaq 100 futures are up 93 points and are trading 0.8% above fair value, and the Dow Jones Industrial Average futures are up 29 points and are trading 0.1% above fair value.

There are several catalysts that have shifted the market into drive:

  • Bank of America (BAC)Johnson & Johnson (JNJ), and Lockheed Martin (LMT) impressed with better-than-expected Q1 earnings results
  • China reported a 4.5% year-over-year increase in Q1 GDP that was stronger than expected
  • HSBC double upgraded NVIDIA (NVDA) to Buy from Reduce; NVDA is up 0.9% in pre-market trading
  • The BofA Global Fund Manager Survey was the most bearish survey of 2023, an indication that has fostered contrarian buying interest
  • The Housing Starts and Building Permits Report for March showed some welcome increases in single-family starts and permits

It isn’t entirely full speed ahead, though, for the market. Dow component Goldman Sachs (GS) topped Q1 earnings expectations but its revenue came up shy of estimates. It is down 3.4% in pre-market trading and is the primary reason for the relative weakness in the Dow Jones Industrial Average futures.

Regional bank stocks, meanwhile, are looking lackluster in pre-market action and J.B. Hunt Transport Services (JBHT) spoke of a freight recession on its earnings conference call, which is a bit of a drag on sentiment.

Still, the broader market is overcoming those issues at the moment, bolstered primarily by the relative strength of the mega-cap stocks and the seeming magnetic appeal of the 4,200 level. Recall that the market’s red-hot start this year ran out of gas at 4,195 on February 2.

The latter understanding is why there is so much interest in the market’s flirtation again with 4,200. Participants are anxious to see if the market proceeds smoothly through that intersection or gets stopped there by a red light.

Briefly, there was no stoppage of homebuilding activity overall in March. Total housing starts might have declined 0.8% month to a seasonally adjusted annual rate of 1.420 million (Briefing.com consensus 1.407 million), but that was due to a decline in multi-unit starts. Single-unit starts were up 2.7% month-over-month to 861,000. Building permits, meanwhile, declined 8.8% month-over-month, driven by a 24.3% decline in permits for 5 units or more, whereas single-family permits increased 4.1% month-over-month to 818,000.

The key takeaway from the report is the growth seen in single-family starts and single-family permits — a leading indicator — which is needed given the limited supply of existing homes for sale.

Originally Posted April 18, 2023 – Market driving toward important intersection

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