E-mini S&P 500 (June): Settled at 4185.75, up 11.25
E-mini Nasdaq-100 (June): Settled at 13,790, down 60.00
With U.S. benchmarks trading near record highs, the first trading day of the month started strongly, but finished on soft footing. Per our discussion here yesterday, it was no surprise to see stocks move higher through the opening bell; they’ve done just that for each of the last 3 months.
Now the question we must answer is whether the first half of May will be similar in strength to February and April, or choppy like March. Bill Baruch joined the Yahoo Finance Closing Bell yesterday and emphasized how we believe May will start off choppier as it digests April’s gains.
Energies +2.9%, Materials +1.5%, Health Care +1.2%, and Industrials +1% led yesterday as the Nasdaq lost 0.43%. The reopening trade was boosted first on news that the European Commission has recommended lifting travel restrictions, and then later by health officials in India calling for Covid-19 cases to plateau. Further tailwinds came from news that New York, New Jersey, and Connecticut plan to lift restrictions over the next 2 weeks.
Despite the strong reopening trade, a less-boisterous ISM Manufacturing PMI read, 60.7 versus 65 expected, seemed to throw cold water over the tape. The S&P opened at major 3-star resistance at 4200.75-4203.25 and failed to chew through before retreating on the heels of the Manufacturing data.
Fed Chair Jerome Powell and NY Fed President John Williams both struck an upbeat tone yesterday, with Powell noting the economy’s picture is brighter and Williams saying that inflation should be at 2% or higher for the rest of the year. Without bubble wrapping such comments with the Fed’s ongoing patient rhetoric, one may easily call these less dovish.
Today, we received Factory Orders at 9:00 a.m. CT and will hear comments from San Francisco Fed President Mary Daly, a 2021 voter, at noon CT.
On the earnings front, energy names are performing well with ConocoPhillips and Marathon Petroleum both topping estimates and gaining about 2% ahead of the bell. Leidos, Martin Marietta, and DuPont also beat top and bottom numbers. After the bell, we’re eager to see reports from T-Mobile, Activision Blizzard, Pioneer Natural Resource, Caesars, and more. (Disclosure: Blue Line Capital owns MPC, LDOS, TMUS, and PXD)
Price action across indices dove lower at 6:30 a.m. CT, but it wasn’t Ferrari’s earnings driving the tape. A wave of risk-off sentiment came on news that a Chinese military aircraft entered Taiwan airspace. This will be something traders must keep an eye on as the session unfolds. Sometimes, investors just need an excuse to sell a little. As we noted above, we expect the first half of May to be choppy as it digests April’s record run.
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