Benzinga - by Shanthi Rexaline, Benzinga Editor.
The two-day rally the broader market witnessed could stall, as traders choose to remain cautious ahead of a string of economic catalysts. The negative reaction to Micron Technology, Inc.‘s (NASDAQ:MU) earnings could generate weakness in the tech space. AI stalwart Nvidia Corp.’s (NASDAQ:NVDA) two-day rally is cooling off following its annual shareholder meeting. Bond yields have ticked up, with the 10-year-old Treasury yield holding above the 4.3% mark.
Traders may bide their time amid the fluid situation in a bid to see off late Thursday’s presidential debate and Federal Reserve’s preferred inflation gauge due on Friday.
| Futures | Performance (+/-) |
| Nasdaq 100 | -0.12% |
| S&P 500 | -0.11% |
| Dow | -0.16% |
| R2K | -0.12% |
Cues From Last Session:
Stocks closed higher on Wednesday although sentiment remained lackluster throughout the session amid caution. The major averages opened lower and the tech strength kept the Nasdaq Composite Index mostly above the unchanged line but the S&P 500 Index and the Dow Jones Industrial Average traded mostly below the flat line before recovering by the close of the session.
Most S&P 500 sector stocks ended weaker, while consumer discretionary stocks found strong buying interest. IT and communications stocks rose modestly.
On the Main Street front, new home sales came in weaker than expected, although one could take comfort from the fact that previous months’ readings were upwardly revised. House prices remained weak.
| Index | Performance (+/-) | Value |
| Nasdaq Composite | +0.49% | 17,805.16 |
| S&P 500 Index | +0.16% | 5,477.90 |
| Dow Industrials | +0.04% | 39,127.80 |
| Russell 2000 | -0.21% | 2,018.12 |
Insights From Analysts:
Morgan Stanley’s Chief U.S. Equity Strategist Matt Wilson advised against the temptation to play for a true broadening out until the macro environment makes a meaningful shift. “The ongoing policy mix of heavy fiscal spending and tight interest rate policy is crowding out many companies and consumers in a way that is unsustainable in our view,” he said.
Investors are therefore bidding up the few stocks of the companies that are doing well in this environment, Wilson said. “Until the bond market pushes back via higher term premium or growth slows down in a more meaningful way, we expect this narrow market performance to persist,” he added.
The strategist said he continues to recommend a “barbell of large-cap quality growth with defensives while fading cyclicals.”
On the other hand, Fund Strat’s Tom Lee expects the momentum to continue for multiple years. The S&P 500 Index can compound at more than 15% annually over the next seven years and hit 15,000 by 2030, he said in an interview with CNBC. His optimism is predicated on favorable demographics, ie millennials and Gen X driving growth in prime-age works, and AI driving a surge in demand for U.S. technology.
Upcoming Economic Data:
- The Bureau of Economic Analysis is scheduled to release its final first-quarter GDP estimate at 8:30 a.m. EDT. Economists, on average, expect quarter-over-quarter GDP growth to be revised up from 1.3% to 1.4%. Traders may also keep an eye on the inflation components of the report.
- The Census Bureau will release the durable goods orders report for May at 8:30 a.m. EDT. The consensus estimate calls for a 1% month-over-month drop in durable goods orders, reversing all of the 0.6% growth in April. Core durable goods orders that strip off transportation orders may have increased by 0.2%, half as much as the growth seen in the previous month.
- The National Association of Realtors’ pending home sales index, due at 10 a.m. EDT, is expected to show a 0.4% month-over-month drop for May versus April’s 7.7% fall.
- The Treasury will auction four- and eight-week notes at 11:30 a.m. EDT and seven-year notes at 1 p.m. EDT.
Stocks In Focus:
- Micron fell nearly 4.75% in premarket trading in reaction to the memory chipmaker’s results.
- H.B. Fuller Company (NYSE:FUL) rose nearly 3%, Worthington Steel, Inc. (NYSE:WS) climbed over 3% and Levi Strauss & Co. (NYSE:LEVI) plunged over 15%, also on earnings.
- Acuity Brands, Inc. (NYSE:AYI), Apogee Enterprises, Inc. (NASDAQ:APOG), McCormick & Company, Incorporated (NYSE:MKC), Walgreens Boots Alliance, Inc. (NASDAQ:WBA) and NIKE, Inc. (NYSE:NKE) are among the companies due to release their quarterly results.
- International Paper Co. (NYSE:IP) fell nearly 15% on a scuttled buyout deal.
Crude oil and futures firmed up, and the benchmark 10-year U.S. Treasury note rose 1.1 basis points to 4.327%. Bitcoin (CRYPTO: BTC) continued to flatline around the $61K mark.
Micron’s earnings and caution ahead of key U.S. data dragged the Asian stocks lower, as the major averages in the region, with the exception of those in India, Indonesia and Singapore, closed lower. The yen plunged to a 38-year low against the dollar amid worries concerning domestic growth. European stocks also showed tentativeness in early trading.
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