After a strong finish to last week, thanks to benign inflation data, sentiment appears to have soured as the market opens after Monday’s Thanksgiving holiday. The index futures were sharply lower early Tuesday. Risk appetite has waned as the market looks ahead to the monthly jobs data, considered a piece of the puzzle that can decide the fate of the widely anticipated rate cuts by the Federal Reserve.
The CBOE Volatility Index, commonly referred to as VIX, spiked by 6.37% to 16.54. Safe haven currencies such as the yen and the U.S. dollar gained ground against their major counterparts
LPL Financial Chief Technical Strategist Adam Turnquist flagged a potentially weak September, with flattish performance in the first half and losses accelerating into the month end. ” For this year, the midway point also happens to line up closely with the September 18 Federal Open Market Committee Meeting,” he said.
Since 1950, the S&P 500 has generated an average return of -0.7% in September and finished higher only 43% of the time, making it the worst month for stocks on an average return and positivity rate basis, he noted.
| Futures | Performance (+/-) |
| Nasdaq 100 | -0.84% |
| S&P 500 | -0.59% |
| Dow | -0.53% |
| R2K | -1.12% |
In premarket trading on Tuesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) fell 0.49% to $560.90, and the Invesco QQQ ETF (NASDAQ:QQQ) slid 0.67% to $473.09, according to Benzinga Pro data.
Cues From Last Week:
Nvidia Corp.’s (NASDAQ:NVDA) earnings proved to be a dampener for the market in the week ended Aug. 30, as stocks stalled ahead of the report and pulled back after the report. Some offsetting impact came from the annual rate of the core personal consumption expenditure index – the Fed’s favorite inflation gauge, which came in a bit below estimate.
The Dow Industrials weathered the weaker sentiment and ended the week at a record high and the S&P 500 Index rose modestly, while the tech-heavy Nasdaq Composite posted a weekly loss.
The major indices closed August in the green despite the turbulence seen early in the month following the unwinding of yen carry trades but small-caps had a down month.
| Index | Weekly Performance (+/) | Value | August Performance |
| Nasdaq Composite | -0.92% | 17,713.62 | +0.65% |
| S&P 500 Index | +0.25% | 5,648.40 | +2.28% |
| Dow Industrials | +0.94% | 41,563.08 | +1.76% |
| Russell 2000 | -0.05% | 2,217.63 | -1.64% |
Insights From Analysts:
The risk-reward for the market is currently unattractive, according to wealth management company Lumida Wealth founder Ram Ahluwalia. Most names do not have attractive valuations and so there is nothing to buy, he said. Artificial intelligence, which has been one of the major market drivers, may cease to be a catalyst, he added, citing recent not-so-positive reports on the technology by Goldman Sachs and Morgan Stanley.
The market has discounted a 50 basis-point rate cut in September, Ahluwalia said, adding that this will unlikely materialize. He sees a nice non-farm payrolls report for August.
“This is a market on ‘accelerated time'. The hot ball of liquidity is making moves up and down faster than most people are accustomed to as those moves ordinarily would play out over a longer time frame,” he said. The wealth manager recommended tactically reducing a net long exposure until earnings season starts in October.
Upcoming Economic Data:
Friday’s non-farm payrolls report for August, the July Job Openings and Labor Turnover Survey, a few private sector activity readings, the Fed’s Beige Book and a few Fed speeches are on the investors’ radar this week.
- S&P Global will release its final manufacturing purchasing managers’ index for August at 9:45 a.m. EDT. The index is expected to slip from 49.6 in July to 48 in August, in line with the flash estimate.
- The Institute for Supply Management is due to release the results of its national manufacturing survey at 10 a.m. EDT. The consensus estimate calls for a reading of 47.9 for August, up from 46.8% for July.
- The Commerce Department is scheduled to release the construction spending report for July at 10 a.m. EDT, with the consensus estimate at a 0.1% month-over-month drop following a steeper 0.3% decline in June.
- The Treasury will auction three- and six-month notes at 11:30 a.m. EDT.
See also: Best Futures Trading Software
Stocks In Focus:
- Unity Software Inc. (NYSE:U) rose over 6% in premarket trading on an analyst upgrade.
- United States Steel Corporation (NYSE:X) fell over 7.5% after Democratic presidential candidate Kamala Harris said she was not in favor of the company’s sale to Japan’s Nippon Steel.
- GitLab Inc. (NASDAQ:GTLB), PagerDuty, Inc. (NYSE:PD) and Zscaler, Inc. (NASDAQ:ZS) are scheduled to announce their quarterly results after the market close.
Commodities, Bonds And Global Equity Markets
Crude oil futures fell sharply, while gold futures held up. Bitcoin (CRYPTO: BTC) rose and yet traded under the $59K level. The yield on the 10-year Treasury note edged down slightly to 3.909%.
The global markets pulled back amid caution ahead of the U.S. jobs data, with most major Asian markets closing lower, while the European markets have started on the back foot.
Read Next:
- Magnificent 7 Miss Out, 2 Cybersecurity Stocks Stand Firm, Retailers Lag In Volatile August: Here Are The Top S&P 500 Gainers And Losers
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