US Stocks Pause For A Breather As Investors Weigh Debt-Crisis DejaVu, Await CPI Report Wednesday

It's a mixed session on Wall Street, with major indexes lacking directionality and showing reduced volatility as caution returned ahead of Wednesday's inflation report.

The debt ceiling impasse continues to alarm investors, who recall the U.S. rating downgrade in 2011, which resulted in a stock market sell-off. Regional bank stocks erased all premarket gains and traded lower, while energy companies outperformed due to a rise in crude oil prices.

Cues From Monday's Trading:

The main averages had a tepid start to the week, with the S&P 500 Index easing by 0.1% and the Nasdaq 100 rising by 0.1%.

The Dow Jones Industrial Average fell 0.2%, while small caps in the Russell 2000 matched the S&P 500 performance. 

U.S. Indices' Performance on Monday, May 8

Analyst Color:

Stocks could be soon inflecting higher, suggested Fundstrat analyst Tom Lee. The Fed is set to pause and the earnings per share results seem to be troughing, he said, adding that this “sounds like a turning point.”

The analyst also highlighted the market’s resilience. Despite calls for “doom,” Fed rate hikes of over 500 basis points, retail liquidation and massive net short increase by institutions, the stock market has been stable in the past 12 months, he said.

Monday's Trading In Major US Equity ETFs: In midday trading on Monday, the SPDR S&P 500 ETF Trust SPY was 0.1% lower to $412.21, the SPDR Dow Jones Industrial Average ETF DIA fell 0.25% to $335.90 and the Invesco QQQ Trust QQQ was 0.1% lower to $322.68, according to Benzinga Pro data.

Almost all U.S. equity sectors were positive, the Energy Select Sector SPDR Fund XLK was the best performer up 0.7%, followed by the Communication Services Select Sector SPDR Fund XLC, up 0.6% and the Financial Select Sector SPDR Fund XLF, up 0.5%. 

The Real Estate Select Sector SPDR Fund XLRE was the worst performer for the day, down 0.7%, followed by the Utilities Select Sector SPDR Fund XLU down 0.5%.  

Latest Economic Data:

Inflation expectations for the one-year horizon dropped from 4.7% in March to 4.4% in April 2023, according to the latest Federal Reserve Bank of New York report. 

The Commerce Department reported an unchanged reading in monthly wholesale inventories for March. 

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Stocks In Focus:

• PacWest Bancorp. PACW shares saw a sharply volatile session, rising as much as 37% in premarket trading and then posting just a 2% gain as of midday, after the company reduced its dividend and said its business remains fundamentally solid. Other regional banking peers such as Western Alliance Bancorp. WAL, First Horizon Corp. FHN, East West Bancorp. EWBC, Comerica, Inc. CMA and KeyCorp. KEY followed suit, with share prices dropping throughout the session. 
• Despite announcing a massive earnings beat ($2.222 EPS versus $0.287 expected), BioNTech SE BNTX gained only 0.6% Monday, as Covid-19 sales are likely to fall in the coming months. 
• Tyson Foods, Inc. TSN plummeted 16% on disappointing earnings results. 
• Advanced Micro Devices Inc. AMD rose 5.8%, building further positive momentum. 
• Lucid Group, Inc. LCID, Palantir Technologies, Inc. PLTR, PayPal Holdings, Inc. PYPL, Skyworks Solutions, Inc. SWKS and Western Digital Corp. WDC are the main companies reporting after market close.

Commodities, Bonds, Other Global Equity Markets:

Crude oil rose 2.4%, with a barrel of WTI-grade crude rising to $72.93. The United States Oil Fund ETF USO was 2.2% higher to $64.39 per share.  

Treasury yields further rose, with the 10-year yield surging 5 basis points to 3.45% and the two-year yield up 3 basis points to 3.95%. The iShares 20+ Year Treasury Bond ETF TLT was 1.2% lower on the day. 

The dollar slightly weakened, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, down 0.1%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, ticked 0.1% higher to 1.1025.   

European equity indices were mixed, with UK, Italy and Spain in the green while France and Germany posted losses. The iShares MSCI Eurozone ETF EZU was flat. 

Gold rose 0.3% to $2,027/oz. The SPDR Gold Trust GLD rose 0.5% $188.39. Silver held steady at  $25.64, with the iShares Silver Trust SLV rising 0.2% to $23.56 per share. Bitcoin BTC/USD dropped 2% to $27,883. 

Staff writer Piero Cingari updated this report midday Monday. 

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