Resilient Stocks Look To Break Free As Nasdaq, S&P 500 Futures Climb: Brace For More Volatility, Sideways Movement Near Term, Says Analyst

Zinger Key Points
  • Stocks have been on a consolidation phase after the January rally stalled.
  • Analyst says there is more upside than downside in the near term, as expectations are already low.

Stocks could attempt to return to their winning ways on Wednesday following the lackluster performance in the previous session. Mixed earnings news flow could, however, act as a dampener.

Cues From Tuesday’s Trading:

The major averages opened uniformly lower and turned mixed thereafter. The Dow Industrials continued to languish below the unchanged line before closing moderately lower. The S&P 500 Index saw strength in early afternoon trading but gave back the gains in late-trading, ending the day modestly lower, while the tech-heavy Nasdaq Composite remained largely above the unchanged line and yet retreated in a late-session sell-off.

See Also: How To Trade Futures

In the process, the Dow Industrials pulled back to its lowest level since Nov. 9. All three major indices closed out February with losses following a strong January.

Tuesday’s weakness reflected apprehension over economic uncertainties amid the release of weak housing, consumer confidence and business activity readings. Bond yields, which share an inverse relation to bond prices and represent the opportunity cost of investing in equities, continue to remain elevated.

Energy, healthcare, consumer staple and utility stocks were among the worst decliners of the session, while communication services, financial and material stocks gained ground.

U.S. Indices' Performance On Tuesday
Index Performance (+/-)   Value
Nasdaq Composite -0.10%   11,455.54
S&P 500 Index -0.30%   3,970.15
Dow Industrials -0.71%   32,656.70

Analyst Color:

Most analysts are hopeful about the market showing resilience. Commonwealth Financial Network Chief Investment Officer Brad McMillan sees more upside than down ahead. Expectations are already low, given a looming recession, continued war in Ukraine, growing confrontation with China, rising inflation, a hawkish Fed and debt ceiling, he said.

“I look at the pullbacks in recent months and the subsequent recoveries as the market looking at all the bad news and deciding that, despite everything, stocks are still reasonably valued,” he said.

“Once the bad news starts to abate, the market can rally.”

That said, the analyst does not expect this to happen anytime soon. He sees more volatility and sideways movement over the next couple of months as the bad news will not diminish that quickly.

Futures Today

U.S. Futures' Performance On Wednesday
Index Performance (+/-)  
Nasdaq 100 Futures +0.56%  
S&P 500 Futures +0.35%  
Dow Futures +0.21%  
R2K Futures +0.17%  

In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust SPY gained 0.40% to $397.84 and the Invesco QQQ Trust QQQ rose 0.56% to $295.20, according to Benzinga Pro data.

Upcoming Economic Data:

The Mortgage Bankers’ Association is set to release its weekly applications volume data at 7 a.m. EST. In the week ended Feb, 17, the seasonally adjusted mortgage application volume fell 13.3% week-over-week and the purchase index fell 18% to the lowest since 1995.

The Commerce Department will release its construction spending report for January at 10 a.m. EST. Spending may have increased 0.2% month-over-month, reversing the 0.4% drop in December.

The Institute for Supply Management’s February manufacturing survey is expected to show contracting activity. Economists, on average, expect the headline manufacturing index to see a slight improvement but remain depressed at 48, below the “50” cut-off level that demarcates expansion and contraction.

The Energy Information Administration is scheduled to release the customary weekly oil inventory report at 10:30 a.m. EST.

Stocks In Focus:

  • Rivian Automotive Inc. RIVN plunged over 8% in premarket trading on revenue miss and weak deliveries guidance.
  • Chinese electric vehicle makers Nio Inc. NIO, Xpeng Inc. XPEV and Li Auto Inc. LI are in focus following the release of their February deliveries. Nio also reported fourth-quarter results, showing higher revenue but a wider loss.
  • AMC Entertainment Holdings Inc. AMC fell over 8% after its fourth-quarter results released after the close showed the string of quarterly losses continuing.
  • HP Inc. HPQ climbed over 3% in reaction to its earnings report.
  • Novavax Inc. NVAX tumbled close to 25% amid doubts concerning its ability to be a "going concern."
  • Tesla Inc. TSLA rose over 1% ahead of its Investor Day, scheduled after the market close.
  • Nvidia Corp. NVDA fell a percent following its $10 billion mixed shelf offering.
  • Abercrombie & Fitch Co.ANF, Dollar Tree Inc. DLTR, Kohl’s Corp. KSS and Lowe’s Companies Inc. LOW are among the noteworthy companies due to release their quarterly results ahead of the market open.
  • Major companies reporting after the close are Box Inc. BOX, Plug Power Inc. PLUG and Salesforce Inc. CRM.

Top Analysts’ Call

  • Palantir Technologies Inc. PLTR: DA Davidson initiates at Neutral with an $8 price target.
  • Philip Morris International Inc. PM: UBS upgrades from Neutral to buy and hikes price target from $106 to $116
  • Rivian: Wedbush maintains at Outperform and cuts price target from $37 to $25

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures were reversing course on Wednesday after yesterday’s over 1% rally. A barrel of crude oil traded down 1.16% at $76.16. Meanwhile, the yield on the benchmark 10-year U.S. Treasury was at 3.918%.

The Asia-Pacific markets closed Tuesday’s session on a mixed note, with Hong Kong and Chinese markets advancing solidly on positive purchasing managers’ survey for China. Most other markets traded on a lackluster note.

European stocks were showing strength in late-morning deals.

Read Next: As Stock Market Rally Stalls, Here Are Crucial Levels For SPY, QQQ Investors Need To Watch This Week

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