Wall Street Stares At Weaker Open On Rate Anxiety, Hopes For Better Earnings: Analyst Pencils Key S&P 500 Support Level

Trading in U.S. index futures suggests stocks may be off to a lackluster start again on Thursday. Much of the negativity in the recent session was triggered by the lack of clarity on the Federal Reserve’s rate trajectory. The spotlight is likely to be on another slew of earnings reports and a Fed speech scheduled for the day. While bullish analysts would like to focus on the resilience shown by the market amid the uncertainty, others warn of a challenging outlook following the breakdown of the broader uptrend in early April.

Cues From Previous Session:

Rate worries amid a lack of clarity from Fed speeches and some negative earnings reports weighed down on the major indices on Wednesday. After starting the day lower, the averages cut their losses substantially by late-morning trading.

Aided by a rally in the shares of Amgen, Inc. (NASDAQ:AMGN) and Boeing Co. (NYSE:BA) and some healthcare and financial stocks, the Dow Jones Industrial Average hovered mostly above the unchanged line thereafter. The 30-stock blue-chip average ended higher for a sixth straight session.

The Nasdaq Composite and the S&P 500 Index spent a better part of the session below the unchanged line, closing modestly lower for the day.

Insights From Analysts:

An economist said there would likely be risks from the drying up of personal savings. LPL Chief Economist Jeffrey Roach said consumers have been drawing down excess savings since mid-2021, with the excess savings drying up as of March. “Throughout the more recent spending splurge, households drew down their savings by roughly $85 billion over the past year,” he said. But the economist sees a way out. Healthy household balance sheets and low mortgage debt servicing will soften the blow, he said.

“Given the decline in excess savings, investors will consider labor market trends even more closely for any leading indicators of future consumer spending,” Roach said.

Morgan Stanley Chief US Equity Strategist Mike Wilson in a recent podcast recommended a barbell of quality cyclicals that should outperform in a “no landing” scenario and quality growth, the relative winner in a “soft landing.” He also suggested a bit of exposure to defensive sectors like Utilities and Staples if growth slowed further.  

The market strategist also weighed in on the trajectory of the broader market. The breakdown in the S&P 500 from its well-defined uptrend in early April was an important early warning sign that performance could become more challenged, he said. 

“Based on our analysis, this headwind to valuation is likely to remain with us through the end of June unless yields fall significantly in the near term,” Wilson said. “Assuming interest rates stay around current levels, stronger valuation support lies closer to 19 times earnings, which would also imply price support closer to the 200-day moving average or 4,800.”

Upcoming Economic Data:

• The Labor Department is scheduled to release its weekly jobless claims report at 8:30 a.m. EDT. Economists, on average, expect the number of individuals claiming unemployment benefits to come in at 214,000 in the week ended May 4, up from 208,000 in the previous reporting week.
• The U.S. Treasury will auction four- and eight-week notes at 11:30 a.m. EDT and 30-year bonds at 1 p.m. EDT.
• San Francisco Fed President Mary Daly is scheduled to speak at 2 p.m. EDT.

See Also: How To Trade Futures

Stocks In Focus:

• Airbnb, Inc. (NASDAQ:ABNB) fell over 8.5% in premarket trading following the company’s quarterly results.
• Other stocks moving on earnings catalyst are AppLovin Corporation (NASDAQ:APP) (up about 15%), Beyond Meat, Inc. (NASDAQ:BYND) (down over 13.50%), Bumble Inc. (NASDAQ:BMBL) (up about 11.5%), Exact Sciences Corporation (NASDAQ:EXAS) (down over 16.50%), HubSpot, Inc. (NYSE:HUBS) (down about 4.50%), Robinhood Markets, Inc. (NASDAQ:HOOD) (up over 5%), AMC Entertainment Holdings, Inc. (NYSE:AMC) (down about 3%), Equinix, Inc. (NASDAQ:EQIX) (up over 10.50%)and SolarEdge Technologies, Inc. (NASDAQ:SEDG) (down about 9%).
• Canadian Solar Inc. (NASDAQ:CSIQ), Cars.com Inc. (NYSE:CARS), Constellation Energy Corporation (NASDAQ:CEG), Ferrari N.V. (NYSE:RACE), Hanesbrands Inc. (NYSE:HBI), Krispy Kreme, Inc. (NASDAQ:DNUT), Papa John’s International, Inc. (NASDAQ:PZZA), Roblox Corporation (NYSE:RBLX), Six Flags Entertainment Corporation (NYSE:SIX), Warner Bros. Discovery, Inc. (NASDAQ:WBD) and US Foods Holding Corp. (NYSE:USFD) are among the notable companies reporting ahead of the market open.
• Those reporting after the close include Akamai Technologies, Inc. (NASDAQ:AKAM), Blink Charging Co. (NASDAQ:BLNK), Dropbox, Inc. (NASDAQ:DBX), Lions Gate Entertainment Corp. (NYSE:LGF), Marathon Digital Holdings, Inc. (NASDAQ:MARA), Navitas Semiconductor Corporation (NASDAQ:NVTS), Rackspace Technology, Inc. (NASDAQ:RXT), Synaptics Incorporated (NASDAQ:SYNA) and Yelp Inc. (NYSE:YELP).

Commodities, Bonds, and Global Equity Markets:

Crude oil futures rose for a second straight session and they were up about a percent at just under $80 a barrel. Meanwhile, gold futures fell for a third straight session, although prices held above the $2,300 mark. The 10-year bond yield, which breached the 4.5% handle intraday on Wednesday before settling shy off the mark, has pushed higher past the level.

The Bitcoin (CRYPTO: BTC) sell-off continues as the king crypto was just under $61,000.

Among global equity markets, Asian stocks fell mostly, barring the ones in Hong Kong, China, and Singapore, amid worries about the U.S. Fed rates. China and Hong Kong received a lift from strong Chinese trade balance data, as exports and imports rebounded in April following negative growth in the previous month.

Major European markets started on a lackluster note on Thursday, with the Euro STOXX 50 slipping 0.29%.

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