It has been six weeks since the S&P 500 had a week when it was up, or down, more than 1.0%. That streak looks poised to come to an end this week, unless today doesn’t go well.
The S&P 500 is up 1.8% for the week, so it has some cushion to work with to maintain that one-handle. Then again, the way the last few sessions have gone, it’s possible the S&P 500 could close out the week with a two-handle in terms of its return.
Currently, the S&P 500 futures are up 12 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up four points and are trading 0.1% above fair value, and the Dow Jones Industrial Average futures are up 93 points and are trading 0.3% above fair value on this options expiration day.
The mega-cap stocks, the semiconductor stocks, and the regional bank stocks have been the star performers this week. The Vanguard Mega-Cap Growth ETF (MGK) is up 3.2%, the Philadelphia Semiconductor Index is up 8.4%, and the SPDR S&P Regional Banking ETF (KRE) is up 9.8%.
The outperformance of the mega-cap stocks is no surprise given the way this year has gone; the outperformance of the semiconductor stocks is a hopeful surprise since they have leading-indicator status; and the outperformance of the regional bank stocks is a pleasant surprise given how things have gone since Silicon Valley Bank’s failure in mid-March.
In any case, the collective outperformance of these stocks has put the S&P 500 on the cusp of breaking out above 4,200. It peaked its head above that level yesterday, but closed just shy of 4,200. Market participants are anxious to see a close above 4,200 knowing that it has been a stern area of resistance since last August.
Some optimistic feelings this week about the debt ceiling discussions have acted as a catalyst for the upside action. That optimism is still intact with President Biden and House Speaker McCarthy both touting a sense of progress in the debt ceiling discussions.
Of course, this itself stands as a near-term risk to the market if these discussions hit a roadblock. We will learn more over the weekend when President Biden returns Sunday from the G-7 Summit, where leaders have agreed to impose more sanctions on Russia for its invasion of Ukraine.
We will also learn more today about Fed Chair Powell’s “perspective on monetary policy” when he participates in a panel discussion at 11:00 a.m. ET on that very topic. Should the topic of current monetary policy or future monetary policy arise, we suspect he will walk a neutral line that emphasizes the Fed being data dependent.
In other words, we don’t expect him to be as declarative as Dallas Fed President Logan (FOMC voter) was yesterday in saying current data doesn’t support the Fed pausing in June.
There are a few stocks of note that aren’t pausing this morning. Deere (DE) is in forward gear, up 3.4% after reporting better-than-expected fiscal Q2 results, and Foot Locker (FL) is in reverse gear, plummeting 25% after posting weaker-than-expected fiscal Q1 results and issuing FY24 guidance well below analysts’ consensus estimate.
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Originally Posted May 19, 2023 – S&P 500 knocking on the door of 4,200
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