US Stocks Look Set To Steepen Losses For Week As Nasdaq, S&P Futures Plunge: Focus On Inflation Data, Fed Speech

Zinger Key Points
  • Stocks have mostly been lower this week, barring one session of upside.
  • Retail investors are upbeat as the AAII's survey for the latest week showed bullish sentiment outweighing bearishness after a while.

The market appears to be persisting with its circumspect mood as seen by the trading in the index futures on Friday.

Cues From Thursday’s Trading:

U.S. stocks ended Thursday’s session lower as traders digested earnings news flow and a rise in bond yields following a trio of Treasury auctions. The major averages opened the session higher after the Labor Department’s weekly jobless claims report showed a bigger-than-expected increase in claims for the recent reporting.

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The indices slowly and steadily gave back their gains and fell below the unchanged line by the mid-session. Selling continued into the afternoon on account of which the averages closed notably lower.

The S&P 500 Index and the Nasdaq Composite settled at their lowest levels in a little over a week, with the Nasdaq Composite retreating to its lowest since Jan. 23.

The market witnessed broad-based weakness, with communication services stocks once again leading the retreat. Material, financial and utility stocks also came under selling pressure.

U.S. Indices' Performance On Thursday
Index Performance (+/-)   Value
Nasdaq Composite -1.01%   11,789.58
S&P 500 Index -0.88%   4,081.50
Dow Industrials -0.73%   33,699.88

Analyst Color:

Stocks traded in a narrow range this week, as winners and losers of the earnings season steered things more than macro consideration, said fund manager Louis Navellier.

“We seem to be in equilibrium between the bulls getting a very strong January bounce and the bears having plenty of misses in the earning season and subsequent forecast cuts,” he said.

Navellier repeated his call for profit, taking in names that have risen to very high P/Es and the names that have bounced on cost-cutting plans but have execution risk. He expects names with high-quality earnings and reasonable P/Es which continue to beat their forecasts to outpace index performance.

Meanwhile, Charlie Bilello, chief market strategist at CPI Wealth, shared a graphic of the results of the American Association of Individual Investor’s Sentiment survey, which showed bulls outnumbering bears in the recent week. This snapped 44 consecutive weeks of bearish sentiment.

“20% rally off the October lows, the biggest bounce we've seen since the market peaked in January 2022. Counterintuitive but many investors hate sales and love higher prices,” he said, explaining the reason for the bullishness of retail investors.

Futures Today

U.S. Futures' Performance On Friday
Index Performance (+/-)  
Nasdaq 100 Futures -1.16%  
S&P 500 Futures -0.64%  
Dow Futures -0.39%  
R2K Futures -0.76%  

In premarket trading on Friday, the SPDR S&P 500 ETF Trust SPY fell 0.60%, to $404.64, and the Invesco QQQ Trust QQQ receded 1.19%, to $298.10, according to Benzinga Pro data.

Upcoming Economic Data:

The University of Michigan is scheduled to release the results of its preliminary consumer sentiment survey for February at 10 a.m. EST. Economists expect the index to edge up from 64.9 in January to 65 in February. Traders may also focus on the inflation readings of the report, namely the one-year and five-year inflation expectations.

Fed Governor Christopher Waller is expected to speak at 12:30 p.m. EST. Earlier this week, he said at an Agribusiness conference in Arkansas that the central bank’s efforts are paying off and that it has more work to do.

Stocks In Focus:

  • Lyft Inc. LYFT plunged over 33% in premarket trading on its fourth-quarter earnings miss and weak guidance.
  • SaaS provider Alteryx Inc. AYX climbed over 10% following its better-than-expected quarterly results.
  • News Corp. NWSA NWS fell over 4% on sub-par fourth-quarter results.
  • Cloudflare Inc. NET rose over 7% in reaction to its quarterly report.
  • Global Payments Inc. GPN, Magna International Inc. MGA and Newell Brands Inc. NWL are among the notable companies releasing their earnings reports ahead of the market open.

Top Analysts’ Call

  • Lyft: Truist downgrades from Buy to Hold and reduces price target from $40 to $14; DA Davidson downgrades from Buy to Neutral and reduces price target from $19 to $12.50; KeyBanc downgrades from Overweight to Sector Weight.
  • Micron Technology Inc. MU: Mizuho upgrades from Neutral to Buy and raises price target from $48 to $72.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures, which snapped a three-session winning streak on Thursday, were rebounding on Friday. A barrel of WTI-grade crude oil traded up about 2% at $79.62. Meanwhile, the yield on the benchmark 10-year U.S. breached the 3.7% level on Friday and traded 0.019 points higher at 3.702%.

Most Asia-Pacific markets ended Friday’s session lower, tracking the negative lead from Wall Street overnight. Hong Kong’s Hang Seng Index fell sharply and the Chinese market pulled back moderately. Among those that bucked the downtrend were the Japanese, Malaysian, Singapore and New Zealand markets.

European stocks retreated on Friday, reversing the gains of the previous session. The major averages in the region opened lower, with the weakness intensifying in late-morning trading.

Read Next: El-Erian Sees 3 Inflation Scenarios: Worst Thing 'Is To Fall Back Into Complacency

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Posted In: EarningsNewsGuidanceFuturesPreviewsTop StoriesEconomicsFederal ReservePre-Market OutlookMarketsTrading IdeasChristopher WallerDow IndustrialsFed Funds RateInflationNASDAQ CompositeS&P 500 IndexUniversity of Michigan Consumer Sentiment Index
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