ZINGER KEY POINTS
- Morgan Stanley analyst sees no respite for recent underperformers but notes that large-caps are well owned.
- There is little demand for traditional defensives despite outperformance over the past 2 months, he adds.
Cautious optimism is likely to return to the market on Wednesday after the sell-off seen on Tuesday amid fears concerning a slowdown in consumer spending. Traders may look for cues from earnings reports from more retailers, the housing starts data and headlines on the debt ceiling stalemate.
Cues From Tuesday’s Trading:
Tuesday, Home Depot, Inc.’s disappointing first-quarter report and a weak April retail sales report stirred worries concerning the health of consumers, the main engine of economic growth.
The major indices opened lower, with the Dow Industrials and the S&P 500 Index languishing below the unchanged line throughout the session. The tech-heavy Nasdaq Composite Index saw some volatility in early trading but managed to reverse course and stay afloat until late trading. The index decisively moved back below the unchanged line before closing lower.
The S&P 500 Index settled at the lowest level in about two weeks, and the Dow Industrials retreated to a 1-1/2 month low.
Energy, utility, real estate, material, financial, industrial, financial, consumer staples and healthcare stocks all came under selling pressure.
U.S. Indices’ Performance Monday
| Index | Performance (+/-) | Value |
| Nasdaq Composite Index | +0.18% | 12,256.92 |
| S&P 500 Index | +0.05% | 4,136.12 |
| Dow Industrials | -0.17% | 33,618.69 |
Analyst Color:
Market participants are now bracing for a range trade at the S&P 500 Index over the near-term, around the 3,800 to 4,200 levels, Morgan Stanley’s chief U.S. equity market strategist Michael Wilson said earlier this week.
Conviction levels are low, given broadly elevated valuations and a challenging macro/fundamental backdrop, the analyst said. He sees very little appetite to dive back into areas of the market that have significantly underperformed like small caps, regional banks, and lower-quality cyclicals.
Large-cap tech remains well-owned, and there is little demand for traditional defensives despite outperformance over the past 2 months, he added.
Futures Performance On Wednesday
| Futures | Performance (+/-) |
| Nasdaq 100 | -0.44% |
| S&P 500 | -0.39% |
| Dow | -0.39% |
| R2K | -0.63% |
In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust gained 0.31% to $411.54 and the Invesco QQQ ETF rose 0.17% at $327.71, according to Benzinga Pro data.
Upcoming Economic Data:
The Mortgage Bankers Association will release its customary weekly mortgage applications volume report at 7 a.m. EDT. Mortgage application volume rose 6.3% week-over-week in the week ended May 10. The increase came ad the 30-year mortgage rate fell amid Fed’s pointer toward a potential pause.
The Commerce Department is due to release the housing starts and building permits data at 8:30 a.m. Economists, on average, expect a small dip in housing, from 1.42 million units in March to 1.4 million units in April. On the other hand, building permits, considered an indicator of future housing activity, may have increased slightly from 1.43 units million to 1.437 million units.
The Energy Information Administration is scheduled to release its petroleum status report for the week ending May 12 at 10:30 a.m. EDT.
The Treasury will auction 20-year bonds at 1 p.m. EDT.
Stocks In Focus:
- Tesla, Inc. rose over 1.50% in premarket trading following its annual shareholder meeting held after the market close on Tuesday.
- Western Alliance Bancorp climbed over 10% after it suggested that deposits growth accelerated in the quarter-to-date period. Peers PacWest Bancorp., Citizens Financial Group, Inc. etc. were all higher.
- Jack In The Box, Inc., Target Corp. and TJX Companies, Inc. are among the companies reporting quarterly results ahead of the market open.
- Cisco Systems, Inc. is due to report after the market close.
Commodities, Bonds, Global Equity Markets
Crude oil futures are slightly higher on Wednesday, up about 0.08% to $70.92. In the previous session, oil
The yield on the benchmark 10-year Treasury note slipped 0.028 percentage points to 3.521%.
The major Asian markets closed mixed yet again on Wednesday, as traders in the region pondered over mixed catalysts. Japan reported stronger-than-expected first-quarter GDP growth, sending the country’s stocks higher. The Hong Kong and Chinese markets paced the declines in the region.
European stocks showed tentativeness in late-morning trading.
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Originally Posted May 17, 2023 – US Stocks Poised To Open Higher, With Housing Data, More Retail Earnings In Sight
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