US Stocks Set To Approach New Week With Caution Ahead Of Fed Meeting, Tech Earnings: Analyst Says 'Buy The Dip' Contingent On This Condition

U.S. stocks are looking to build on past week’s gains, with the mood remaining cautiously optimistic. The major index futures were modestly higher in early trading.

Given the strong gains in the past week, it wouldn’t come as a surprise if traders choose to take some profits, especially with the Fed meeting looming. Analysts hope the upward momentum gains strength if the central bank chooses to deliver a dovish message. In the absence of any major Main Street cues, the focus is likely to rest solely on earnings.

Futures Performance On Monday ( as of 6:20 a.m. EDT)

Cues From Past Week’s Trading:

U.S. stocks rebounded strongly in the week ended April 26, thanks to the optimism generated by strong corporate profit growth. The Nasdaq Composite and the S&P 500 Index entered the week with six straight sessions of losses and bargain hunting lifted the major averages early in the week. Although the indices suffered inflation jitters in the middle of the week, the earnings catalyst helped a strong comeback in the final session.

The Nasdaq Composite and the S&P 500 Index snapped four-week and three-week losing streaks, respectively, and finished at their best closing levels since April 12.

Insights From Analysts:

The market could be entering a seasonally strong period of election years, according to Carson Group’s Ryan Detrick. “Historically, June, July, and August tend to be strong months in an election year,” he said.

April may have been a blip on the radar. With two more sessions to go, there is a possibility that the major indices can inflect higher.

Tom Lee of FundStrat recommended buying the dip, predicating it on the Fed maintaining a dovish bias at the May monetary policy meeting. “Buy the dip regime in effect as long as #Fed is not a #hawk,” he said.

Upcoming Economic Data:

The week’s economic calendar will be headlined by the Federal Open Market Committee’s rate decision due on Wednesday. A pause verdict has been factored in by the market, but traders will closely watch the language used in the post-meeting policy statement and Chairman Jerome Powell’s press conference.

A slew of labor market data are also due for the week, including the all-important non-farm payrolls report, ADP’s private payroll report, first-quarter productivity and costs data, the results of the Labor Department’s job opening and labor turnover survey and the weekly jobless claims data.

The other key data includes the Conference Board’s consumer confidence reading, the Institute for Supply Management’s manufacturing purchasing managers’ index, a regional manufacturing activity reading and the results of two house price surveys. After the Fed’s blackout period expires, traders will also get to hear from some Fed officials.

On Monday, the Dallas Fed manufacturing index is due to be released at 10:30 a.m. EDT.

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

See Also: How To Trade Futures

Stocks In Focus:

• Tesla, Inc. TSLA rose over 7% in premarket trading after CEO Elon Musk’s surprise China visit over the weekend reportedly marked a major headway in launching its full self-driving software in the country and transferring data from the country.
• AMC Entertainment Holdings, Inc. AMC fell about 3% following its pre-announcement made after the market closed on Friday.
• Paramount Global PARA rose about 4.5% after a Bloomberg report said the Redstone family and Skydance Media CEO David Ellison have both made concessions to make a potential change in control at Paramount Global more appealing to the company’s other investors.
• JinkoSolar Holding Co., Ltd. JKS, ON Semiconductor Corporation ON and SoFi Technologies, Inc. SOFI are among the major companies due to report their quarterly results.
• Notable names reporting after the close are F5, Inc. FFIV, Everest Group, Ltd. EG, NXP Semiconductors N.V. NXPI, Lattice Semiconductor Corporation LSCC, MicroStrategy Incorporated MSTR, Paramount Global, Qiagen N.V. QGEN, Rambus Inc. RMBS, Sanmina Corporation SANM and Yum China Holdings, Inc. YUMC.

Commodities, Bonds, and Global Equity Markets:

Crude oil futures fell modestly on Monday after the commodity gained 0.85% in the week ended April 26, while gold futures traded modestly higher, with an ounce of the yellow metal fetching over $2,350.

The 10-year note yield pulled back to 4.628% ahead of the week’s Fed meeting.

Bitcoin BTC/USD fell over 1.50% and traded around at $62.5K level.

The Asian markets advanced strongly, led by the Chinese market, as the positive mood seen on Wall Street on Friday rubbed off on the stocks in the region. The Japanese market remained closed for a public holiday. Meanwhile, European stocks have started on a tentative note. The Euro STOXX 50 Index was down 0.17% in early trading.

Read Next: Strong Quarterly Earnings Fuel Market Optimism Despite Inflation Concerns, Slowing Economic Growth: This Week In The Market

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