Nasdaq, S&P Futures Flatline As Key Inflation Data, More Earnings Lie In Store This Week: Analyst Flags 'Some Caution' On Overvaluations

U.S. stock futures once again displayed indecision on Monday, echoing recent sessions and reflecting market uncertainties. With no major earnings reports expected in the morning, attention is likely to turn to Federal Reserve officials’ speeches scheduled for the day and the New York Fed’s January consumer expectations reading. Bond yields remained stagnant above the 4% mark, while oil prices retraced after last week’s surge.

Cues From Last Week’s Trading:

Positive tech earnings overshadowed concerns about rate uncertainty, leading to a week of gains across the board. Despite hawkish comments from Fed officials, traders remained focused on upbeat earnings and a rally in crude oil, buoying energy stocks and lifting market sentiment.

As a result, major indices extended their winning streak for a fifth consecutive week. The Nasdaq Composite Index closed at its highest level since Nov. 19, 2021, while the Nasdaq 100 Index set a new closing record. The S&P 500 breached the 5,000 level for the first time, driven by optimistic fundamentals and better-than-expected earnings.

Although the 30-stock Dow Industrials closed slightly below its record high on Friday, broader participation was evident as the Russell 2,000 Index surpassed the psychological resistance of 2,000 for the first time since early January.

US Index Performance In Week Ended Feb. 9

Analysts and economists are optimistic about the strong performance of the market this year. LPL Chief Economist Jeffrey Roach attributed the recent market buoyancy to the expectations that artificial intelligence will boost productivity and help strong economic performance.

“This year should be another good year despite the risks of some choppiness in the near term as investors wait for that first cut from the Fed,” he said.

Rob Swanke, Senior Equity Strategist at Commonwealth Financial Network, sounded a note of caution. “Some caution is warranted with valuations continuing to climb above 20x forward earnings and getting closer to the peak of 21.4x we saw when the S&P 500 was at 4,800 at the beginning of 2022,” the analyst said.

“We're still well below the 25x forward earnings of the dot com bubble and many of the companies driving the markets have solid earnings prospects so I wouldn't say we're in bubble territory, but the market is pricing closer to perfection now and companies will have to continue to hit high earnings targets in 2024, something they didn't have to do in 2023.”

Futures Today

Futures Performance On Monday

In premarket trading on Monday, the SPDR S&P 500 ETF Trust SPY moved up 0.01% to $501.26 and the Invesco QQQ ETF QQQ added 0.06% to $437.30, according to Benzinga Pro data.

Upcoming Economic Data:

The week’s economic events start slow but momentum builds up in the second half of the week. Notable among the reports due are the Labor Department’s producer and consumer price inflation reports for January as well as the weekly jobless claims report, the Commerce Department’s retail sales report for January, two regional manufacturing activity data from the New York Federal Reserve and the Philadelphia Fed, and the Fed’s January industrial production report.

Traders also get to digest another slew of Fed speeches, two housing market reports and the University of Michigan’s preliminary consumer sentiment reading for February.

On Monday, Fed Governor Michelle Bowman is scheduled to speak at 9:20 a.m. ET. Richmond Fed President Thomas Barkin and Minneapolis Fed President Neel Kashkari will make public appearances at 12 p.m. ET and 1 p.m. ET, respectively.

The New York Fed will release its January consumer price inflation expectations report at 11 a.m. ET. The December survey showed inflation expectations, one year ahead, falling from 3.4% in November to 3%.

The Treasury will auction three- and six-month bills at 11:30 a.m. ET.

The Treasury will release the monthly federal budget for January at 2 p.m. ET, with the deficit likely narrowing from $39 billion to $21 billion.

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Stocks In Focus:

• Rivian Automotive, Inc. RIVN fell over 3% in premarket trading on a negative analyst action.
• monday.com Ltd. MNDY and Trimble Inc. TRMB are due to announce their quarterly results before the market opens.
• Notable companies scheduled to report after the close include Arista Networks, Inc. ANET, Avis Budget Group, Inc. CAR, Goodyear Tire & Rubber Company GT, Lattice Semiconductor Corporation LSCC, Principal Financial Group, Inc. PFG, Vornado Realty Trust VNO and Waste Management, Inc. WM.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures fell 0.95% to $76.11 in early European session on Monday after the commodity rallied 6.31% in the week ended Feb. 9. The benchmark 10-year Treasury note remained unchanged at 4.098%.

Most Asian markets remained closed for the Chinese New Year holiday, while Japan was shut in observance of the National Day. Those markets that were open for trading on Monday ended lower due to indecision amid a lack of domestic trading cues and apprehensions over the sustenance of the rally in the U.S.

European stocks advanced rose and were moderately higher in late-morning trading on Monday.

In the currency market, the U.S. dollar firmed up against most major trading pairs but it slipped against the yen. Most cryptocurrencies pulled back early Monday, with the apex currency, Bitcoin BTC/USD down about 1% to the sub-$48,000 level.

Read Next: ‘Puzzling,’ Says Analyst As Microsoft’s Valuation Double That Of Energy Companies Despite Generating Half Their Cash Flow

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