Wall Street Braces For Strong Open On Nvidia Cheer, But Traders Wary Of Key Data: Why This Analyst Sees More Market Bullishness Near-Term

Major U.S. index futures jumped early Thursday as Nvidia Corp.’s NVDA earnings provided a shot in the arm for the market. A couple of market-moving economic data on the job market and the manufacturing sector and a Federal Reserve official’s speech could also affect the day’s trading. Given the confounding rate outlook, the focus is likely to be squarely on these numbers to understand their implications for the Fed funds rate. A market strategist pointed to historical seasonal strength around May-end through early July.

Cues From Previous Session

U.S. stocks ended Wednesday’s session weaker, dragged by the minutes of the May Federal Open Market Committee meeting that suggested the central bank is resigned to the idea of staying “higher for longer.” As rate-cut bets unraveled, bond yields nudged up, creating additional selling pressure. Investors also preferred to remain cautious ahead of Nvidia’s earnings.

The averages opened on a narrowly mixed note and hugged the unchanged line until the afternoon. After declining sharply following the release of the minutes, they made good some of their losses by late trading and yet ended lower for the day.

Barring healthcare, industrial, and IT stocks, all other S&P 500 sector classes ended in the red.

The major indices all settled off their all-time highs, although the Nasdaq Composite managed to hit an intraday high.

Carson Group’s Ryan Detrick on Wednesday shared a chart to suggest the market could go another leg up in the near term. Citing historical data, the strategist said, “The last week or so of May and early June tends to be a bullish time for stocks historically,” he said.

“Our current focus is on U.S. consumers, whose spending powers more than two-thirds of the national economy. Data here paints an increasingly fragile backdrop,” she said, citing the recent sub-par University of Michigan consumer sentiment reading and weak April retail sales data.

Shalett mentioned the following as better bets during the fluid environment:

• Companies with high-quality cash flows and achievable earnings targets.
• investment-grade credit and a form of “insurance” via options on the VIX or puts on the S&P 500
• international equities and real assets, such as gold, real estate investment trusts, master limited partnerships, and commodities

Upcoming Economic Data:

• The Labor Department is due to release its customary weekly jobless claims data at 8:30 a.m. EDT. Economists, on average, expect the number of individuals claiming unemployment benefits to come in at 220,000 for the week ended May 18, down slightly from 222,000 in the previous week.
• S&P Global will release its flash U.S. manufacturing and services purchasing managers’ indices for May at 9:45 a.m. EDT. The consensus estimates call for the flash manufacturing PMI to remain unchanged at 50, a level that demarcates expansion and contraction, and the services PMI to edge up from 51.3 in April to 51.6 in May.
• A Commerce Department report due at 10 a.m. EDT is expected to show new home sales coming in at a seasonally adjusted annual rate of 675,000 in April, down from the March reading of 693,000.
• The Treasury will auction four- and eight-week notes at 11:30 a.m. EDT and 10-year TIPS at 1 p.m. EDT.
• Atlanta Fed President Raphael Bostic is scheduled to speak at 3 p.m. EDT.

See Also: How To Trade Futures

Stocks In Focus:

• Nvidia rallied over 6.6% in premarket trading following its beat-and-raise quarter and copious shareholder returns.
• Other stocks moving on earnings are Snowflake Inc. SNOW (over 3%), V.F. Corporation VFC (down over 14.50%) and Zuora, Inc. ZUO (up over 10%).
• Bilibili Inc. BILI, BJ’s Wholesale Club Holdings, Inc. BJ, Medtronic plc MDT, NetEase, Inc. NTES and Weibo Corporation WB, Ralph Lauren Corporation RL, Shoe Carnival, Inc. SCVL are among the other notable companies reporting before the market opens.
• Those reporting after the close include Intuit Inc. INTU, Ross Stores, Inc. ROST, Workday, Inc. WDAY and Lions Gate Entertainment Corp. LGF.
• News Corporation NWSA rallied over 7% on the news of an OpenAI partnership.

Commodities, Bonds, and Global Equity Markets:

Crude oil futures snapped a three-session losing streak and rose solidly, while gold futures pulled further back below the $2,400 level. The U.S. 10-year note yield fell 1.2 basis points to 4.422% and Bitcoin BTC/USD retreated below the $70,000 mark.

In Asia, Chinese and Hong Kong stocks fell sharply following recent gains, orchestrated by hopes of stimulus measures. The Australian and South Korean markets experienced more modest weakness, while most other major markets rallied, led by Japan.

European stocks saw tentative gains in early trading following the sharp pullback in the previous two sessions.

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