Benzinga - Sentiment appears to be mixed on Thursday, as tech stocks look poised for a strong rally, propelled by Nvidia Corp.’s (NASDAQ: NVDA) sensational quarterly performance. The underlying mood remained one of caution as the debt deal continues to prove elusive between President Joe Biden and the House Republicans. Traders may watch out for any development on this front and also stay tuned to the pricing component of the first-quarter GDP report and housing market data as well as the rising bond yields.
Cues From Wednesday’s Trading:
Stocks pulled back on Wednesday as a debt ceiling deal continued to be a pipedream. House Speaker Kevin McCarthy’s (R-Calif) comments in a press conference held in late-morning highlighted a lack of agreement between the parties. The minutes of the May Federal Open Market Committee meeting released in the afternoon did not help matters, as most Fed officials signaled that they see the need for at least one more hike to quell inflationary pressure.
The indices opened lower and were seen moving broadly sideways before ending on a weak note. The Dow Industrials was down for a fourth straight session, as the 30-stock blue-chip average fell below the psychological level of 33,000 and pulled back toward the lowest level in late April.
The S&P 500 Index and the Nasdaq Composite were lower for a second consecutive day.
Once again energy stocks bucked a broad-based sell-off, with financial, real estate, technology and material stocks coming under intense selling pressure.
| Nasdaq Composite | -0.61% | 12,484.16 | |
| S&P 500 Index | -0.73% | 4,115.24 | |
| Dow Industrials | -0.77% | 32,799.92 |
The market has weathered the headwinds fairly well and has shown resilience but an analyst cautioned that this could be a false dawn.
Morgan Stanley market strategist Mike Wilson noted that the S&P 500 is showing signs of breaking out of the 3,800-4,200 narrow trading range that has defined it for the past six months. The analyst, however, feels market fundamentals are less attractive today than they were six months ago and risks are elevated.
“While AI could lead to some substantial efficiencies that help fight inflation, it’s likely no match for the earnings recession that we forecast for this year,” Wilson said.
The analyst said he believes the rally will prove to be a “head fake” as seen last summer, given the unattractive valuations, too-optimistic earnings estimates, investors’ unrealistic expectations regarding a Fed rate cut, and the markets turning a blind eye to key risks such as the banking crisis.
Futures Today
| Nasdaq 100 Futures | +1.86% | |
| S&P 500 Futures | +0.67% | |
| Dow Futures | -0.16% | |
| R2K Futures | -0.38% |
Upcoming Economic Data:
The Labor Department is scheduled to release its customary jobless claims report at 8:30 a.m. EDT. Economists expect the number of individuals claiming for unemployment benefits to increase from 242,000 in the week ended May 13 to 250,000 in the week ended May 20.
The Bureau of Economic Analysis is due to release its second estimate of first-quarter GDP at 8:30 a.m. EDT. The consensus estimate calls for an annual rate of real GDP growth of 1.1%, in line with the advance estimate. This is down from a 2.6% growth seen in the fourth quarter. Traders may also focus on the pricing components of the report, including the GDP price deflator and the year-over-year rate of the personal consumption expenditure index.
The Chicago Fed National Activity Index for April is also due at 8:30 a.m. EDT, with the index expected to show a narrower rate of contraction.
The National Association Of Realtors will release its pending home sales index for April at 10 a.m. EDT. The index is expected to rise 0.5% month-over-month following a 5.2% drop in March.
Boston Fed President Susan Collins is scheduled to speak at 10:30 a.m. EDT.
The Kansas City Fed’s composite and manufacturing indices for May are due to be released at 11 a.m. EDT.
The Treasury will auction four- and eight-week notes at 11:30 a.m. EDT and seven-year notes at 1 p.m. EDT.
See also: Futures Trading: Best Futures To Trade
Stocks In Focus:
- Nvidia rallied over 25.50% in premarket trading on Thursday following its first-quarter beat. Peer Advanced Micro Devices, Inc. (NASDAQ: NVDA) moved in sympathy, adding about 8.75%. Most technology stocks are reacting with a move to the upside.
- Other stocks moving in reaction to their quarterly results are Nutanix, Inc. (NASDAQ: NTNX) (up over 16%), Splunk, Inc. (NASDAQ: SPLK) (up over 9.50%) and Snowflake, Inc. (NYSE: SNOW) (down over 14%).
- Virgin Galactic Holdings,Inc. (NYSE: SPCE), promoted by Richard Branson, is set to launch its first spaceflight mission in nearly two years on Thursday. The stock climbed over 6%.
- Best Buy, Inc. (NYSE: BBY), Dollar Tree, Inc. (NASDAQ: DLTR), Medtronic plc. (NYSE: MDT), NetEase, Inc. (NASDAQ: NTES) and Weibo Corp. (NASDAQ: WB) are among the companies reporting results before the market opens.
- Notable companies due to release their quarterly results after market close include Autodesk, Inc. (NASDAQ: ADSK), Gap, Inc. (NYSE: GPS), Costco Wholesale Corp. (NASDAQ: COST), Lions Gate Entertainment Corp. (NYSE: LGF-A) (NYSE: LGF-B) and Marvell Technology, Inc. (NASDAQ: MRVL).
Crude oil futures were pulling back after three straight sessions of gains. In early European trading on Thursday, oil fell 1.44% to $73.27 a barrel.
The yield on the benchmark 10-year Treasury note rose 0.036 percentage points to 3.775%.
Most major Asian markets pulled back on Thursday, as traders in the region awaited resolution for the debt ceiling impasse. Hong Kong’s Hang Seng Index led the region’s decline. The Japanese, Indian and Taiwanese markets bucked the downtrend. Tech optimism fuelled the rally in Taiwan, given the heavy weighting of tech stocks in the benchmark index.
European stocks showed nervousness in late-morning trading.
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