Wall Street Gears Up For Strong May Finish Even As Futures Slip On Inflation Data Jitters: Analyst Predicts June Slowdown Before H2 Surge

Zinger Key Points
  • Weak data and mixed earnings proved to be the undoing of the markets on Thursday.
  • The Dow Jones Industrial Average fell for a third straight session and ended at the lowest since May 1

Stocks look set to end May on a positive note, even as index futures pointed to a negative opening on Friday. But sentiment could reverse if important inflation data due ahead of the market open appeases Wall Street. The inflation data assumes importance as it could have a bearing on the June 11-12 Federal Reserve’s rate-setting meeting, with the May consumer price inflation report due only on May 12. Reactions to earnings, especially from the tech and retail spaces, have been mixed.

FuturesPerformance (+/-)
Nasdaq 100-0.48%
S&P 500-0.31%

In premarket trading on Friday, the SPDR S&P 500 ETF Trust SPY fell 0.26% to $521.27, and the Invesco QQQ ETF QQQ traded down 0.47% at $449.44, according to Benzinga Pro data.

Cues From Previous Session

Wall Street ended lower on Thursday as traders expressed disappointment over weak economic data and weak earnings reports. The preliminary first-quarter GDP report showed a downward revision to the advance estimate from 1.6% to 1.3% and pending home sales fell sharply in April. Although the weak data sent bond yields lower for the first time in four sessions, traders fretted over a potential hard landing due to the lagged impact of the aggressive rate hikes.

The Dow Jones Industrial Average fell for a third straight session and ended at the lowest since May 1, while the S&P 500 Index and the Nasdaq Composite Index extended their losing streak to two, with the former settling at the lowest level since May 13. On the other hand, small-cap stocks climbed strongly.

Communication services and IT stocks fell sharply, while most other S&P 500 sector classes advanced, led by defensive real estate and utility stocks.

IndexPerformance (+/-)Value
Nasdaq Composite-1.08%16,737.08
S&P 500 Index-0.60%5,235.48
Dow Industrials-0.86%38,111.48
Russell 2000+1.00%2,056.60

Insights From Analysts:

The S&P 500 Index is up about 4% so far this May, and LPL Chief Technical Strategist Adam Turnquist said April’s 4.2% has been pared because of the rebound seen this month. The strategist, however, is not positive about the near term. “Peaking ahead to June, seasonality trends are hardly anything to get excited about. Since 1950, the S&P 500 has generated an average and median price return in June of 0.1%, with 55% of months posting positive results,” he said.

For the remainder of the year, the S&P 500 posted average and median gains of 4.9% and 6.4%, respectively. Following a positive May, the average and median gains bump up to 5.4% and 6.8%, Turnquist said.

Upcoming Economic Data:

  • The Bureau of Economic Analysis is scheduled to release the personal income and spending report at 8:30 a.m. EDT. Economists, on average, expect personal income and spending to increase at a month-over-month rate of 0.3% and 0.4%, respectively, in April. In March, the rates were at 0.5% and 0.8%. The Fed’s favorite inflation gauge – the core personal price consumption expenditure index may have increased by 0.2% and 2.8%, respectively. This compares to March increases of 0.3% and 2.8%, respectively. The consensus estimate for the month-over-month and year-over-year rates for the headline PCE index are 0.3% and 2.7%.
  • The Chicago-ISM will release the results of its regional manufacturing survey at 8:45 a.m. EDT. The Chicago business barometer may have improved from 37.9 in April to 40.8 in May. The reading, despite showing an improvement, suggests the sector is still in contraction territory.

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Stocks In Focus:

  • Dell Technologies Inc. DELL plunged over 15% in premarket trading following the company’s earnings announcement.
  • Other stocks moving on earnings are Ambarella, Inc. AMBA (up over 16%), Asana, Inc. ASAN (up over 13%),  Cooper Companies, Inc. COO (up over 4%), Gap, Inc. GPS (up over 23%), Marvell Technology, Inc. MRVL (down over 5%), MongoDB, Inc. MDB (down 25%), Nordstrom, Inc. JWN (down nearly 7.5%), PagerDuty, Inc. PD (up nearly 11%), SentinelOne, Inc. S (down nearly 14%), Ulta Beauty, Inc. ULTA (up over 7%) and Zscaler, Inc. ZS (up nearly 17%).
  • Genesco Inc. GCO is due to release its quarterly results ahead of the market opening.

Commodities, Bonds And Global Equity Markets:

Crude oil futures rose modestly, while gold futures edged down. The U.S. 10-year Treasury note yielded 4.56%, a slight increase from the 4.55% at which it ended Thursday. Bitcoin BTC/USD firmed up past the $68K level.

The major Asian markets closed mixed, as traders mulled over some domestic economic data. While weak private sector activity data sunk stocks in China and Hong Kong, the Japanese market received support from sector-specific strength.

European stocks were mixed in early trading.

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Posted In: EarningsEquitiesNewsFuturesPreviewsTop StoriesEconomicsFederal ReservePre-Market OutlookMarketsMoversTrading IdeasAdam TurnquistInflationStories That MatterUS market preview
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