The stock market has made a nice rebound run since last week’s FOMC meeting. Yesterday, however, the S&P 500 hit a wall at 5,200. When it did, there was a uniform retreat in the major indices that diminished the stock market’s rebound impulse.
That’s not to say there was an unchecked rush of selling interest, only that there was a fading of the buying interest that had been persistent up to that point.
In the same vein, the equity futures market is fading away this morning. Again, not so much because sellers have taken control of the action, but because buyers are showing a lack of conviction at the index level.
Currently, the S&P 500 futures are down 22 points and are trading 0.4% below fair value, the Nasdaq 100 futures are down 112 points and are trading 0.6% below fair value, and the Dow Jones Industrial Average futures are down 78 points and are trading 0.2% below fair value.
It is some typical consolidation activity after a nice run in a short period of time. At yesterday’s highs, the Russell 2000, Nasdaq Composite, and S&P 500 were up 5.6%, 5.4%, and 3.7%, respectively, from their lows on May 1 (FOMC day).
Outsized moves are being reserved largely for individual stocks. We saw that yesterday with Walt Disney (DIS), which fell 9.5% in response to its tepid fiscal Q3 guidance. We are seeing it this morning with the likes of Uber (UBER), Rivian (RIVN), Cirrus Logic (CRUS), Reddit (RDDT), and Twilio (TWLO).
They are all moving big in response to their earnings results and/or guidance. UBER is down 8.2%; RIVN is down 7.1%; CRUS is up 15.0%; RDDT is up 11.8%; and TWLO is down 7.3%.
These aren’t the only movers of note, but their price action reflects a market that has turned more discerning at the micro level. To that end, the rewards are greater on positive surprises, whereas the penalty is larger on disappointments.
The hefty influence of the mega-cap stocks, however, is more often than not the swing factor for the index futures. Sure enough, the “Magnificent 7” are bereft of magnificence at the moment, except Apple (AAPL), which is up 0.2%.
Tesla (TSLA) is down 3.7% on a Reuters report of a DOJ investigation that is focusing on wire and securities fraud in its Autopilot investigation. For some added flavor, Alphabet (GOOG), Amazon.com (AMZN), and NVIDIA (NVDA) are down between 0.9% and 1.2%.
These losses are hanging over the major indices. Traders will be watching to see if they foster a rotation into other names or if they dissuade buying interest in the broader market as well. The latter has been helped by the drop in market rates since the FOMC meeting, but that tailwind has faded away in the early trade.
The 2-yr note yield is up one basis point to 4.84% and the 10-yr note yield is up three basis points to 4.49% in front of today’s $42 billion 10-yr note auction. Results will be announced at 1:00 p.m. ET.
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Originally Posted May 8, 2024 – Fading away
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