Looking to the Futures: Equity Markets Rally

The S&P 500 traded slightly higher in an abridged trading session yesterday around optimism in debt ceiling negotiations. Tech stocks rallied to close out last week with companies projecting significant revenue increases in the artificial intelligence space. Positive economic news on Friday pushed markets higher despite the increased likelihood of another 25-basis point increase by the Fed in the June FOMC meeting. In the bear camp Ulta Beauty and Big Lots traded lower after missing on their earnings announcements.

Rueters reported over the weekend that U.S. President Joe Biden and House Speaker Kevin McCarthy reached a tentative deal to suspend the federal governments $31.4 trillion debt ceiling. Negotiations have been deadlocked for months and still require Congressional approval. U.S. Treasury Secretary Janet Yellen commented last week that the United States could default on certain obligations in early June if a deal is not met.

Nvidia led the tech sector higher last week after beating on top and bottom lines and gapping up over +25% to start last Thursdays session. NVDA reported 1st quarter earnings of +$1.18 EPS against estimates of +$0.91 EPS on revenue of $7.2 billion against the estimates of $6.5 billion.

Marvell Technology also traded significantly higher on 1st Quarter earnings after beating on top and bottom lines and projecting AI revenue to "at least double" in 2024 compared to a year ago.

Economic data released on Friday came in better than expected with U.S. Apr personal spending increasing +0.8% m/m against the expected increase of +0.5% m/m. Personal income was in line with expectations at +0.4% m/m.

U.S April capital goods orders nondefense ex-aircraft and parts jumped +1.4% m/m against an expected decline of -0.1% m/m.

The U.S. April PCE core deflator, a primary data point to gauge inflation, rose +0.4% m/m and +4.7% y/y higher than the expected  increase of +0.3% m/m and +4.6% y/y.

Markets were still able to rally on Friday despite the increased likelihood of another 25 bp increase by the FOMC in their next meeting in June. As of the time of this writing the FOMC FedWatch Tool has a 58.4% chance of a 25-basis point hike during the June meeting. 

Ulta Beauty traded lower last week on poor guidance for 2024 comparable sales providing some support to bearish traders. The company was able to meet expectations on EPS and Revenue, but poor projections shook investor confidence.

Looking at the daily chart for the E Mini S&P 500 June 2023 (ESM23) contract we can see the 50-Day Simple Moving Average acting as a support level for the past two months of trading. ESM23 broke through the 20-Day SMA price level on Friday which could act as a new short-term support level.

Trading Central’s Daily Technical Analysis has support levels found at 4198.0 and 4175.0 with resistance levels at 4260.0 and 4280.0.

According to the CFTC Commitment of Traders Report released May 23^rd asset managers have increased their long position by +6,169 contracts and decreased their short position by -8,405 contracts. Asset managers are net long 627,612 contracts.

The 14-Day Relative Strength Index at 59.57% is indicative of the recent buying pressure but the contract has not moved into overbought territory.

Consumer Confidence                              10:00 AM ET

FHFA Housing Price Index                        9:00 AM ET

S&P Case-Shiller Home Price Index         9:00 AM ET